Can I discharge a car lease with Chapter 7 bankruptcy?

Chapter 7 bankruptcy does have the means by which you may be able to take advantage of a discharge car lease option; however, it is important to consider the alternatives carefully.

The first step is to file a Statement of Intention (SOI) informing the court and the lender of your intentions concerning your property, including your car. The options include:

• Surrendering the car and rejecting the lease, discharging the debt for the car in the bankruptcy

• Hoping the lender will allow you to continue making payments under the old agreement without formally assuming a new lease; if you default on your payments, the lender may still be able to take back the car, but you will not be responsible for any deficiency (or the difference between the lease amount and the current value of the car)

• Assuming the lease, possibly with renegotiated terms, that allows you to keep the car as long as you continue payments; if you default on your payments, the dealer may be able to repossess and they may hold you liable for any deficiency

A bankruptcy attorney can help you talk to the dealer and determine if they will require you to assume a new lease before you determine if bankruptcy is the right option for you. It will also help you decide whether to attempt to assume the lease on this car or choose another solution.