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.

Before you file for Chapter 7 bankruptcy, you should first determine whether you will qualify by using the means test. People often think of passing a test as a huge obstacle to achieving their goals. However, a bankruptcy means test is unlikely to prevent you from filing for Chapter 7 bankruptcy if you need the advantages that come with this form of bankruptcy. You may be at greater risk of not qualifying for Chapter 7 bankruptcy because you were not thorough enough in documenting your income and expenses. An experienced bankruptcy attorney will conduct the means test for you and tell you whether the results suggest that you will qualify for Chapter 7 bankruptcy.

Meaning of the Test

The means test was created to prevent people from using Chapter 7 bankruptcy when they have sufficient disposable income, based on certain allowable expenses, to make a meaningful payment on their unsecured debts. Chapter 7 bankruptcy is advantageous in some situations because:

Before a debtor can file for bankruptcy, they must complete a certified credit counseling course. What is this required course, why do you need it, and how can you make it work to your advantage? The following information explains and provides some important details on how an attorney can assist you through the bankruptcy process.

What is Pre-Bankruptcy Credit Counseling?

Once you have decided that bankruptcy is the right option for you, you must then decide which type of bankruptcy you would like to file. In some cases, the decision is based on your circumstances. In others, it is a matter of personal preference. Learn more about the types of bankruptcy available to individuals and small businesses, including how to determine which one may be most appropriate for you, with help from the following information.

The Basics: Chapter 7 versus Chapter 13

At first glance, all forms of bankruptcy might appear the same. However, there are some distinct differences between Chapter 7 and Chapter 13. For example, Chapter 7 bankruptcy discharges most forms of secured debt, meaning the debtor is no longer responsible for them. Another major difference is how assets are retained during each bankruptcy process. For example, if a borrower is making payments on a vehicle, the creditor may still repossess the car if a Chapter 7 bankruptcy is filed. In Chapter 13, the debtor may be permitted to keep the vehicle if they continue to make the agreed upon payments.