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Should You Continue Your Vehicle Lease During Bankruptcy?

Posted on in Bankruptcy

Should You Continue Your Vehicle Lease During Bankruptcy?Protecting your motor vehicle is often a priority during your bankruptcy. In a Chapter 7 case, different rules apply when you are leasing a vehicle. Monthly lease payments may be cheaper than loan payments, but you do not actually own the vehicle. Chapter 7 bankruptcy filers must decide whether they will assume or reject their vehicle lease.

Assuming the Lease

Filing for bankruptcy puts an automatic stay on your vehicle lessor’s attempts to repossess your leased vehicle. The bankruptcy trustee technically has 60 days to claim your lease, but this is rarely done because the trustee would need to find someone else who would be willing to pay more than you to lease the car. You should decide whether you want to assume the lease before that deadline. You can keep the vehicle by assuming the lease, but:

  • You will be responsible for continuing payments under the lease contract;
  • The lessor can reject your request to assume the lease and try to repossess the vehicle (but that rarely happens); and
  • The lessor can repossess the vehicle if you cannot keep up with payments.

Chapter 13 bankruptcy can help you keep your leased vehicle if you are behind on lease payments because you can include the payments in your long-term repayment plan.

Rejecting the Lease

You may conclude that you cannot afford to continue paying the terms of your lease contract. Besides your monthly payments, a vehicle lease can penalize you for exceeding a mileage limit each year or causing wear and tear to the vehicle. You could also incur a fee if you cancel the lease early. You have 45 days after filing for bankruptcy to reject your vehicle lease, after which you will surrender your vehicle to the lessor. You will stop making lease payments, and any money you still owe from the lease will be unsecured debt, which you can discharge at the end of your bankruptcy.  This is one of the many benefits of filing a bankruptcy.

Contact a Frisco Bankruptcy Attorney

The obvious downside to rejecting your vehicle lease is that you will no longer have that vehicle. You may think that you have no choice but to assume the lease if that vehicle is your only means of transportation, but you can surrender the lease and purchase another vehicle with a payment that is more in line with your budget. A Denton County bankruptcy attorney at The Page Law Firm can advise whether you should continue your vehicle lease and how it may affect your bankruptcy. Schedule a free consultation by calling 214-618-2101.


National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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