Should I be worried about losing my leased car?

[magicalcat]

Hi everyone,

I've just begun the process of filing Chapter 7 bankruptcy. In 2020, I leased a C300 Mercedes and my lease will last for another year. I've been keeping up with the payments and I want to keep the car. My attorney told me I can assume the car lease and keep my car, but I'm afraid somehow something will go wrong and I'll end up losing the car against my will.


Can Mercedes somehow take the car back even though I've made timely payments and they won't be apart of the bankruptcy? Can the trustee decide that I need to return the car because he deems that it's unreasonable for me to drive such a car with my current income?

I don't know if these are silly questions, but I've been reading various articles online that are scaring me, and my attorney hasn't been as communicative as I would like.

[justbroke]

Mercedes-Benz (MB) doesn't want the car. They want your money. In a Chapter 7, property that is encumbered (has a loan) must be a.) redeemed, b.) returned, or b.) reaffirmed. However, a lease is not your property -- it is the property of the lessor (MB). In a Chapter 7, an active lease must either be assumed (accepted) or rejected. The acceptance of the lease keeps the terms in place as if nothing happened. The debt is not discharged and the debtor is subject to all collection rights that the lessor had as if no bankruptcy was filed.

I don't believe that MB can do anything if you assume the lease unless you are behind in payments or otherwise in default of the lease. The filing of a bankruptcy would not put you in default of the terms of the lease.

The only thing the Chapter 7 Trustee could do (effectively) is if your monthly payment is greater than $588/month. If it's greater than that, then every dollar over that amount will be counted as "available" in the Means Test for calculating your disposable monthly income (DMI). The Means Test is what determines whether you are eligible for a Chapter 7 discharge. Your DMI can be a major factor in means testing if you are over-the-median income.

If your lawyer has run your numbers and has fit you into a Chapter 7, then I would not worry. It is well-known that a vehicle is "necessary" for the rehabilitation of a debtor. If the monthly payment far exceeds that $588/month, then the Trustee could raise the question as to whether that is a luxury item and whether you should be able to claim the entire amount.

Welcome to BKForum.

[magicalcat]

Thank you so much for your response! This puts my mind at ease. My car payment is over $588, so I will ask my attorney about this. Hopefully my trustee won't make an issue out of it.