If you’ve recently filed for bankruptcy, you may be wondering what’ll happen to your leased vehicle. The good news is there are options to pick from, the bad news is leasing post-bankruptcy may not be quite as easy.
Your Options for What to Do
Before you decide to assume or reject a car lease, you’re required to file a Chapter 7 Debtor’s Statement of Intention (SOI) with your bankruptcy trustee within 30 days of filing for Chapter 7 bankruptcy.
The SOI informs your creditors what you plan to do with any unexpired car leases or debts that are secured. If you don’t file the SOI within 30 days, the dealer has the ability to repossess your vehicle.
When you file the SOI for your leased car, here are your two options:
- Assuming the car lease – If you choose to assume the lease, this means you plan on keeping the leased vehicle and agree to make timely payments until the lease is up. Any initial agreements made on the lease will be kept, and the consequences will be the same if you break them, regardless of being in a bankruptcy. Be careful before assuming a lease. If you’re able to make lease payments on time, assuming could be a great move to make. If there’s a chance of defaulting after assuming the lease, you can be sued by your creditor for the amount owed, so double check your finances.
- Rejecting the car lease – Rejecting the lease may be the best option if you have trouble keeping up with payments, or if the car has extensive damage or high mileage that'll come with hefty fees at the end of the term. When you reject the lease, you’re telling the creditor that you plan to give up the lease and the vehicle. All payments and further liabilities will be lifted, and this is part of the automatic stay, which prevents creditors from asking you to pay debts. Once the SOI is filed, your creditor can file a motion to lift, or wait on, the automatic stay to expire before repossessing the vehicle.
Leasing in the Future
Your future efforts to lease a car depend on whether you assumed or rejected the lease. If you rejected the lease, leasing another vehicle after bankruptcy will be extremely difficult. If you assumed the lease, you shouldn’t find it too difficult to lease another car once your current lease is complete, even if you have bad credit – especially if you try again with your current lessor.
Because filing for bankruptcy drops your credit score, though, even your current lessor may require a security deposit, and you may not qualify for the best interest rate.
If you filed for bankruptcy and lost your vehicle, Drivers Lane may be able to assist. We specialize in helping people with unique credit issues – such as bankruptcy – find a dealer who can help them with their auto financing needs. Our service is free and doesn't put you under obligation to buy anything. Get started by filling out our auto loan request form today.