By Ryan C. Wood

One of the most important parts of having a job is being able to get to the job each and every day. That means you need reliable transportation. There are a number of misconceptions when filing for bankruptcy protection. A common question is will I lose my car? If you cannot afford to make the monthly car loan or lease payment, then probably yes. You have to continue to make the car loan payment or lease payment to keep a car with a loan or a lease. If you can make the car loan payment or lease payment each month, then rarely will you lose a vehicle when seeking bankruptcy protection.

Leased Vehicles and Chapter 7 Bankruptcy

When you seek the counsel of a bankruptcy lawyer and file for bankruptcy protection with a lease vehicle you have a couple of options. You may either assume the lease or reject the lease. Assuming the lease means that you intend to fulfill the terms of the lease you agreed to prior to the bankruptcy filing. Section 365(d)(1) of the Bankruptcy Code provides: “In a case under chapter 7 of this title, if the trustee does not assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor within 60 days after the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such contract or lease is deemed rejected.” This means that you and/or the trustee assigned to your case, depending upon the circumstances, must decide whether to assume or reject a car lease within 60 days of the bankruptcy case being filed. This time limit can be extended though. If the car lease is not assumed within the 60 days the lease is automatically rejected and it is time to turn over the vehicle to the dealership that leased it to you.

Lease Vehicles and Chapter 13 Bankruptcy

When filing a Chapter 13 bankruptcy to reorganize your debts you may also keep a lease vehicle or choose to get rid of it. Some Chapter 13 bankruptcy cases are filed to pay back missed lease payments in the Chapter 13 plan and then continue to make the regular lease payment after the case is filed. Make sure you let your bankruptcy attorney know if you are current on the lease payments or behind when you discuss your circumstances during the initial consultation. Most Chapter 13 plans have a designated section for leases. There will be a box for the name of the other party to the lease, a description of the leased item, the regular monthly payment, the amount of the payments missed before the case was filed and lastly the monthly amount to be paid in the Chapter 13 plan to catch up the missed lease payments. If a lease is not listed in this section of the Chapter 13 plan, the plan usually provides the lease is rejected. Upon approval of the Chapter 13 plan by the court the effected lease holder may take all steps necessary to enforce their rights pursuant to applicable law. Basically you should turn the leased vehicle over to the dealership so they can sell it or auction it off.