Car leases in Chapter 7 bankruptcy can either be assumed or rejected. If you assume the car lease, you remain legally liable for the original lease contract. When you reject your lease, you surrender the vehicle and have no further liability for lease payments or fees. If you are considering bankruptcy and are currently leasing a vehicle, an experienced Kansas City bankruptcy attorney can explain all of your bankruptcy options, including what will happen to your car lease in Chapter 7 or Chapter 13 bankruptcy.
Assuming a Car Lease
Depending on the lease terms and your overall financial situation, assuming a car lease in Chapter 7 bankruptcy may benefit you in the long run. Below are some reasons to consider assuming a car lease:
- Lease payments are low — if you reject the lease, you will have to give back the vehicle, and getting another vehicle right after bankruptcy might entail financing it at an unfavorable interest rate with higher payments
- You are current on lease payments — if you are not behind on payments, then you will not have to make any catch-up payments to assume the lease
- You intend to purchase the vehicle at the end of the lease term — you’ll need to assume the lease to keep the vehicle and continue under the lease agreement
It is important to understand that if you assume a car lease in Chapter 7 bankruptcy, you remain legally liable for the original contract as though you never filed for bankruptcy. If you fall behind on lease payments after your bankruptcy case is complete, the creditor can repossess your vehicle. If you incur mileage or damage charges at the end of the lease, you will be responsible for paying those fees. Before making any decisions about a car lease, discuss your options with a knowledgeable Kansas City bankruptcy lawyer.
Rejecting a Car Lease
Assuming a car lease in Chapter 7 bankruptcy is not always the best decision. Depending on the circumstances, you may be better off rejecting the lease and walking away from the vehicle and all liability for it. Below are reasons to consider rejecting a car lease:
- Lease payments are too high — if you are struggling to keep up with payments, or if the lease is for a luxury vehicle you do not need, it may be best to reject the lease and move forward with no further liability for it
- You are behind on lease payments — the creditor may require you to catch up all past due payments before allowing you to assume the lease
- Mileage or damage fees are looming — if you are or will be over the mileage limits, or if there is damage to the vehicle, you can avoid these fees by rejecting the lease
A qualified Kansas City bankruptcy attorney can help you decide whether assuming or rejecting a car lease would be in your best interests. To learn more about the entire bankruptcy process, contact a Kansas City bankruptcy lawyer today.