Introduction

Filing for bankruptcy can be a daunting process, and one of the first questions that may come to mind is whether you can keep your car. At O1ne Mortgage, we understand the complexities of financial distress and are here to guide you through your options. Call us at 213-732-3074 for any mortgage service needs.

Can You Keep a Leased Car in Bankruptcy?

It’s possible to keep a leased car in bankruptcy as long as you’re able to keep up with the monthly payments. This is because a lease is not considered debt in bankruptcy. Instead, it is a contract that you agree to fulfill by returning the vehicle at the end of the lease period.

When you file for bankruptcy, you have two options regarding your leased car: assume the lease or surrender the vehicle. You must declare your intention to keep or surrender your car to the court, the bankruptcy trustee, and your creditor. Consulting a bankruptcy attorney is advisable to avoid complications.

Does the Type of Bankruptcy Matter?

Both Chapter 7 and Chapter 13 bankruptcy provide the option to keep or surrender your leased vehicle, but each can impact your financial situation differently.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, you must complete a Statement of Intention to inform the leasing company of your decision to either “assume” (continue) or “reject” (discontinue) your lease. Here are some key points:

• You have 30 days to file your Statement of Intention. Otherwise, the automatic stay could lift, allowing your lessor to repossess your car.
• Your payments must generally be current to assume the lease. If you can’t catch up on payments, you can return the car without further obligation.
• If you reject the lease, you’ll have to surrender the car but will no longer owe payments on it.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy initiates a repayment plan for you to repay some or all of your debts. If you’re not current on your lease payments, you’ll have to include the past-due balance in your three- to five-year repayment plan. The bankruptcy trustee can choose to assume or reject your lease based on your financial benefit.

Can You Start a New Lease in Bankruptcy?

Bankruptcy will have serious ramifications for your credit, making it more challenging to get approved for new credit, including car loans and leases. Although some lenders may lease a car soon after bankruptcy, you’ll likely face higher payments.

Consider whether keeping your current lease is more beneficial, especially if you depend on your car for work or if your existing lease payment is lower than what you might expect with a new lease.

The Bottom Line

Your financial situation is unique, and bankruptcy courts have different requirements. It’s essential to consult with a bankruptcy attorney before making important decisions. A reputable attorney can help you navigate the legal system and protect your financial interests.

If you decide to declare bankruptcy, remember that it’s never too early to start rebuilding your credit. Follow a budget and pay your bills on time each month. Monitoring your credit can help you track your progress and spot potential issues.

Contact O1ne Mortgage

At O1ne Mortgage, we are committed to helping you navigate your financial challenges. For expert mortgage services, call us at 213-732-3074. Our team is here to assist you every step of the way.