CAN I KEEP MY LEASED VEHICLE?
A very common issue that needs to be addressed is can a debtor keep a vehicle that is under lease? There are several different answers to this question based on the actual situation of the debtor.
Is the debtor current or behind on payments? In a bankruptcy, the act of filing does not immediately change the rights of the creditor. For this reason, the first question is to determine where the debtor is in the payment process.
If the debtor is current, the creditor cannot take the vehicle just because the debtor has filed for bankruptcy. There is a provision in many of the lease contracts that a debtor who files bankruptcy is immediately in default. This is called an ipso facto clause which means the the very fact of filing bankruptcy is an event of default so that the creditor may take the vehicle.
Fortunately, the Bankruptcy Court for the District of South Carolina has ruled that the ipso facto clause is not enforceable when you file a bankruptcy. This does not mean that you can keep your car, but, you will have rights set forth in the Bankruptcy Code that may allow you to keep your car. Keeping your car means working with competent counsel to determine how would be best way to keep the vehicle.
Before you try to keep the vehicle, make sure that you are better off keeping the vehicle. A true lease has a provision that says at the end of the lease you have to pay something to the creditor. That amount can be substantial if the vehicle has high mileage or damage. The lender does not have to finance the balance owed. You may have to write a very large check to keep your car.
When you assume a lease as a part of the bankruptcy case, you will become liable for any monies owed at the end of your lease. You have worked hard to get your fresh start, but, now you have another debt to pay.
Was keeping that leased vehicle worth it?