Any leases you have must be accounted for when filing for bankruptcy. You must either assume or reject your lease in your bankruptcy petition. This includes leases for cars, but also for things such as furniture and real estate.
You must declare your intention so that your creditor knows what you were doing, and know what their rights are. If you’re in Chapter 7 bankruptcy and you wish to continue paying on a lease obligation, you simply assume the lease and continue to make the payments. The bankruptcy automatic stay stops creditors from taking back property. However, if you fall behind on the lease payments after the bankruptcy discharge, they can take the property back. Also, at the end of an assumed auto lease in either chapter 7 bankruptcy or Chapter 13 bankruptcy, you may still be liable for any damage to the vehicle or other fees associated with returning the vehicle. Bankruptcy will not discharge this obligation.
If you wish to get away from a lease in chapter 7 bankruptcy, you simply reject the lease and return the property. You will not owe anything else to the leasing company, including any remaining fees.
In Chapter 13 bankruptcy you must also declare what you want to do with your leased property . The Chapter 13 bankruptcy plan must account for it and pay the lease throughout the duration of the bankruptcy. The lease will otherwise not be affected.
Leased property need not be lost or returned in bankruptcy, but it must be accounted for either by paying the contract terms or returning the property. If you were having trouble with a lease or have general questions about your financial situation, call us at 412-414-9366 to set up a free consultation. I would be happy to discuss these issues with you!