If you have a car lease bankruptcy gives you options. When you file bankruptcy, your lease is treated as what is called an executory contract and you can either assume or reject that executory contract, that is, you can assume or reject the lease. When you assume a car lease in bankruptcy, it means that you are choosing to keep the car and continue making your payments as you were doing before filing for bankruptcy. Rejecting the lease means you are choosing to give up the car and stop making your payments. When you exercise your right to reject a lease, your liability for future payments is eliminated and you are not liable for any overages or any other charges.
Car lease treatment in bankruptcy cases depends upon whether you are filing bankruptcy under Chapter 7 or Chapter 13. Each Chapter has its own procedure for treatment of car leases in bankruptcy. Both Chapters allow you to keep your car as long as you are willing and able to become current and continue making your payments. Each Chapter has its own benefits and each Chapter has its own particular uses. Both Chapter 7 and Chapter 13 allow you to assume or reject a lease, but each Chapter has its own unique legal procedure.
In Chapter 7 cases, the trustee has 60 days to decide whether to assume or reject your car lease. In practically every case, the trustee will elect to reject, because it has no value to the trustee and it is too burdensome and of little or no value to administering a Chapter 7 case.
Typically, the San Diego bankruptcy trustees will not do anything (they are very busy) and after 60 days your car lease will be deemed rejected since the trustee is not likely to assume it. Once a lease is deemed rejected, you can assume it if you want to do so, by notifying your car leasing company or finance company, in writing, that you want to assume the lease and keep the car.
In a Chapter 7, car leases will generally be assumed by you, at your option, unless you don’t want to keep your leased vehicle anymore. If you don't want to keep it, you can give it up, in which case the lease will remain rejected and you need not make any further payments to the leasing company or finance company.
If you want to assume, the way it works, mechanically, is that within 60 days of your bankruptcy filing you will sign a Lease Assumption once your case is filed (without waiting 60 days) and the Lease Assumption becomes operative and is valid and enforceable upon the trustee's rejection.
In Chapter 13 cases, the trustee has until your Chapter 13 plan confirmation hearing to either assume or reject your car lease. In almost all cases, the San Diego bankruptcy trustees will elect to reject the lease, since a car lease is generally too burdensome or of little or no value to the administration of a Chapter 13 case.
Once the trustee elects to reject, you will have the option to assume or reject. In practice, the way it works, mechanically, is that you will propose a Chapter 13 plan that either assumes or rejects your car lease, and your election to assume or reject will be confirmed when the plan is confirmed since the trustee will almost always reject the car lease.
Despite the technical aspects of car lease treatment in Chapter 13 cases, a car lease is generally a benefit that you will get to keep when you file bankruptcy in San Diego. An experienced lawyer can help you propose a Chapter 13 plan that assumes your car lease and will be confirmed. Once your plan is confirmed, so is your election to retain the car lease.