Can You File Bankruptcy on a Leased Vehicle?
If you are thinking of fining for bankruptcy protection, you may wonder if you can include a leased vehicle in your bankruptcy filing.
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Leased Vehicle Inclusion
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Both Chapter 7 and Chapter 13 bankruptcy filings allow the inclusion of leased vehicles.
Keeping the Vehicle in Chapter 13
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Payments on the lease cannot be made through a Chapter 13 debt-repayment plan. Instead, you must reaffirm the lease with the lessor and make payments outside the bankruptcy plan.
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Keeping the Vehicle in Chapter 7
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You can reaffirm a lease in a Chapter 7 bankruptcy filing. Otherwise, the car will be sold, and the proceeds will be used to pay the lease balance.
Obligations in Chapter 13
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If you keep the leased vehicle, you will be obligated to continue making lease payments to avoid repossession. If you reject the lease, you may be responsible for any difference between the lease contract balance and the sale amount of the vehicle.
Obligations in Chapter 7
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If you reaffirm a lease in a Chapter 7 bankruptcy, you are obligated to make timely lease payments. If you surrender the vehicle, you are not responsible for amounts owed on the lease.
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