There are several things that could happen to an auto lease after filing bankruptcy. It depends on the actions you take prior to filing. You do have a few options and it is best to be aware of these so that you can avoid the pitfalls that could happen after filing bankruptcy. Having this information will give you a roadmap to make the right decision for you and your specific situation.
One option would be to include the lease in the bankruptcy. This will take away the responsibility of the balance of payments; however you will lose the equity you have built from payments made thus far. You may want to consider how close you are to the end of your lease.
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If you include your lease car in the bankruptcy, they will repossess the car, possibly leaving you with no transportation. Another thing to consider is what you will do for wheels should you let the car go with the bankruptcy.
Including the lease in the bankruptcy will also most likely excuse you from any of the fees and penalties that will come with breaking the lease, as these will become discharged after the filing.
Then, there is the assumption of the lease. Here the person filing bankruptcy has the choice to keep the lease separate from the bankruptcy and continue paying as per the original agreement. In some states, there may be paperwork for the lease assumption. These papers need to be filled out properly and filed with the bankruptcy. You want to hire an attorney if you go with this option.
Once you agree to a lease assumption, it is best to remain current with the lease payments and adhere to all terms. If not, the bank has the right to repossess the car with little or no notice.
The final option is called a ride-through. This will allow you to continue to the best of your abilities to honor the lease agreement. This works similar to the assumption of a lease, however there is no paperwork filed at the time of the bankruptcy.
Should you fall behind, the lessor has the right to come and take the vehicle from your possession, leaving you with no transportation.
An additional note here, you may not receive a statement for the monthly payment as the bank is going to avoid anything that could be misconstrued as an attempt to collect a debt. Obtain the address and make a note on your calendar when the payment is due so that you do not inadvertently miss the payment.
What happens to your car after filing bankruptcy could be best determined by you. Just remember to act ahead of time and make the best choice possible with your circumstances. It's always best to consult with your attorney when it comes to the bankruptcy laws in your state.
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