What Happens to My Vehicle Lease if I File For Chapter 13?

Many individuals planning to file for chapter 13 bankruptcy wonder what will happen to their assets, including their auto lease. Your vehicle is likely important to you, as it gets you to work each day. Without your vehicle, you may not have the opportunity to earn more income, which you need to make your chapter 13 payments.

What Is Chapter 13?

Chapter 13 is a type of bankruptcy. It is often referred to as a wage earner’s plan because it combines the individual’s debts into one, affordable monthly payment. The debtor makes these monthly payments for a specified period. At the end of the repayment plan, any leftover debts are forgiven. A chapter 13 bankruptcy usually lasts for three to five years, depending on the terms set by the trustee. 

People often have questions wondering if chapter 13 is right for them and what is included, or not included in the bankruptcy filing, including whether or not they can keep their auto lease.

Can I Keep My Auto Lease in a Chapter 13 Bankruptcy?

Whether or not you can keep your auto lease in a Chapter 13 bankruptcy filing will depend on the individual debtor. The debtor may accept or reject the auto lease. However, working with a knowledgeable bankruptcy lawyer can improve your chances of including certain debts in your chapter 13 filing, like your auto lease.

Requirements for Including an Auto Lease in Chapter 13 Bankruptcy

There are a few requirements for including an auto lease in a chapter 13 bankruptcy filing. These include:

  • Auto lease payments must currently be in default
  • Past due payments must be brought up-to-date quickly
  • The debtor must formally accept or deny the payment plan
  • The lease must have begun before the bankruptcy filing

Because the debtor must formally accept or deny the plan within 60 days, it can lead to an automatic decline, even if the debtor would have otherwise agreed to the plan. This is a great reason to work with a bankruptcy lawyer, who can help you ensure that debtors receive communication and respond in a timely manner.

Should I Include My Auto Lease In My Bankruptcy Filing?

Just because an auto lease is accepted as a part of your chapter 13 bankruptcy filing does not mean that it makes sense to include it. Auto leases can put individuals in a difficult financial situation. Depending on the payments, it can be difficult to catch up with other debts. Additionally, leases expire and if your bankruptcy plan extends beyond your auto lease, you will end up returning the vehicle anyways. At this point, you are left trying to replace your vehicle while in the middle of a bankruptcy filing.

Instead, it may make sense to buy used or a lease-to-own instead. However, most debtors will not offer a lease-to-purchase option, while in the middle of a bankruptcy filing. 

Discuss Your Case With a Bankruptcy Lawyer Today

A bankruptcy lawyer will help you consider your options. In addition to choosing the right bankruptcy, either chapter 7 or 13, your lawyer will also help you understand New Jersey’s bankruptcy laws, including eligibility requirements. When you work with a bankruptcy lawyer who is familiar with New Jersey’s laws, you can increase your chances of your filing being approved.

Contact a Clifton Bankruptcy Attorney for a Consultation About Chapter 13 in New Jersey Today

If you are struggling with debt, you may need a fresh start financially. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. The experienced New Jersey bankruptcy lawyers at the Law Office of Silverman and Roedel, LLC understand the nuances of New Jersey and federal bankruptcy laws, so we can help you protect your interests. Call us anytime at (973) 772-6411 or fill out the online contact form to schedule a confidential consultation. We have an office conveniently located at 1187 Main Avenue, Suite 2C, Clifton, NJ 07011.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.