Auto Lease in BK?

[Lawrence21]

Hello again. I will be filing CH13 in a couple of month's. We have two auto leases, 450 & 500 per month. Mine has two years left and it just sits in the driveway as I fly or rent a car for my job. WIth insurance that's about $600+ wasted. Any advise on putting that car in the BK? My attorney said there are pros and cons. Adding it to the eBK will save me $$ but it will show an additional $600 per month in disposable income. Any suggestions??
Thanks as always.

[sophieanne]

Hi...will have to see what others say cause I’m not sure. I was leasing a vehicle just before I filed..it was 2 at the time. My lawyer suggested purchasing before filing. The vehicle was low mileage and in excellent condition so opted to purchase it. That worked out great. I know every situation is different.

[justbroke]

Hello again. I will be filing CH13 in a couple of month's. We have two auto leases, 450 & 500 per month. Mine has two years left and it just sits in the driveway as I fly or rent a car for my job. WIth insurance that's about $600+ wasted. Any advise on putting that car in the BK?

All property that you have is "in the bankruptcy" as property of the bankruptcy estate. You will just need to decide whether you want to surrender the property or keep it (in a Chapter 13).

My attorney said there are pros and cons. Adding it to the eBK will save me $$ but it will show an additional $600 per month in disposable income. Any suggestions??

Exactly. This is bankruptcy planning and in the Chapter 13 context it can get interesting. Since those are leases, they will fall off in the Chapter 13 anyhow and your payment would go up. It may actually be better to go purchase a car (not on a lease) and then use that as your vehicle.

Here's the benefit of purchasing. The Chapter 13 will (likely) payoff that owned vehicle whereas a lease is going to haunt you in the middle of a Chapter 13. It will haunt you because you may still need a vehicle and then, 2 years into the lease, you have to return it or buy it. Purchasing the vehicle in the middle of a Chapter 13 will be a challenge to say the least. Yes, it can be done but for Chapter 13s you want to enter with a "new" reliable car with a warranty that lasts at least as long as the Chapter 13.

A new vehicle can also save you $$$ as the Chapter 13 will give you both the ownership and operating allowance which could put extra $$$ in your reserve fund. This is what I call Chapter 13 bankruptcy planning. I kept my 2 vehicles specifically to have that cushion, but my vehicles were not lease.

[shipo]

The two best things about buying a new car just before a Chapter 13 are:

• Few if any unscheduled maintenance related expenses, and
• you will exit your bankruptcy with a fully paid off car as an asset.

[flashoflight]

Buy an extended warranty (5 years, low/no deductible) and a maintenance plan and finance both of them prior to filing. If you buy later, the trustee will probably not allow you to finance the extended warranty or maintenance plan. The loan should last 66 or 72 months depending on how soon you file if you're on a 60 month plan.

[Lawrence21]

So if I understand, I should surrender both leased vehicles into the BK and go out before filing and finance two new vehicles over 5+ years? If I'm allowed to do that, my concern would be not having hardly anything to put down and of course getting approved with my current credit score would be a challenge.

[shipo]

So if I understand, I should surrender both leased vehicles into the BK and go out before filing and finance two new vehicles over 5+ years? If I'm allowed to do that, my concern would be not having hardly anything to put down and of course getting approved with my current credit score would be a challenge.

That is pretty much the mindset I was in before I filed my Chapter 13; in an effort to stave off BK, I downsized to the extreme, and by the time I was filing I was driving an old Honda Accord. My attorney instructed me to buy a new car, even if only a lowly Toyota Corolla, to get me to and from work. I was afraid my credit rating and the high amount of debt I had at the time would prevent me from being able to buy a car, so I decided to soldier on with the old Accord. Yeah, about that, the car only made it three years into my five year Chapter 13 before corrosion got the better of it.

The other thing I've learned, primarily from this forum, is there are ways to buy a car just prior to filing, in fact, I believe I ran across a thread here a while back where either the poster's attorney, or maybe even the Trustee, directed the individual to a specific dealership which was very friendly to folks about to file. In my case, had I done that I would have exited my Chapter 13 in March of this year with a paid off car likely worth well over $10,000 dollars, instead I exited with a 14 year old car worth $4,000, on a good day.

[justbroke]

Just be aware that you can only have one vehicle per licensed driver in a household. Additionally, the household members should be immediately family (and in some cases, they will let you keep vehicles for elderly parents). If you claim more than 2 vehicles, you'll have to also demonstrate that the household needs more than 2 vehicles for health and safety.

[Carmella]

Just be aware that you can only have one vehicle per licensed driver in a household. Additionally, the household members should be immediately family (and in some cases, they will let you keep vehicles for elderly parents). If you claim more than 2 vehicles, you'll have to also demonstrate that the household needs more than 2 vehicles for health and safety.

We were allowed to keep the car in my name that my new college grad daughter who was not employed/lived with us was driving. We had only two car payments as the third car my husband drove was a junker without a payment.

[justbroke]

We were allowed to keep the car in my name that my new college grad daughter who was not employed/lived with us was driving. We had only two car payments as the third car my husband drove was a junker without a payment.

This is similar to what I had to prove, only I had 3 cars and one was used by my elderly mother.