Lease return question

[VegasMom75]

Sorry if this is a repeat question.

My husband and I will be filing either a chapt 7 or 13 in a couple of months. We are going to be returning our Volvo early. The finance company said we could do a early lease return if we make 1 more payment. The representative said it would only show the remaining payments as a bad debt (8k) vs having it repo'd and showing the full amount of the lease contract left (22k)

Is there really a difference if I am filing bk? Or are they trying to get 1 more payment squeezed out of us???

Thanks for your input!!!

[wildebeast]

It seems like if you are filing BK anyway your credit will be shot. So what difference will making 1 more payment make?

[Tbornetun]

Sounds like they want one more payment. You are filing anyway, the lease will be included. Let it go, keep your money.

[IBroke]

It might matter. I'd say it dependps on your prior payment-history on that car. There is bad credit and not-so-bad bad credit. I'll try to explain:

Car-dealers often use an Auto-Enhanced FICO-score. This score focuses on your prior payment-history with cars. There is a difference in score-evaluating between having an account with no late payments that is discharged or an account with multiple lates (30 days, 60 days etc.) that's discharged. Even when your auto-loan is discharged, the account itself (incl. the payment-history) stays on file for 7 to 7 1/2 years after your date of first delinquency. So if you get a late-payment on your last month and you always paid on time, you might be carrying a late-payment for the next 7 to 7 1/2 years. A BK itself doesn't mean your credit is ruined anyway. That's why I always encourage people to ACTIVE the first day after the discharge and get secured loans an credit-cards to get back into the game. You have to clean up all the errors on your report as well - many lenders will "forget" to report your accounts as "IIB - included in BK" and update the balance to $0. Now go figure what damage these accounts make if they are not corrected..

The earlier you file for BK, the better you're off. Many people pull the brake when the damage is already done.

So what I'm saying is that it might pay off to keep on making payments (and stay less than 30 days past due) until you FILE for BK. No need to make payments after that or until you're discharged since under the FCRA, lenders are not allowed to report lates after you've filed - no matter if you actually ARE or not.

So let's take two individuals who basically have the same records (let's say 5 credit-cards).

One is filing BK before he misses a payment - he will have the BK in his public records BUT NO LATE PAYMENTS. The other individual waits for a few months, misses the payments on his accounts and files BK. He has the same Public Record BUT in ADDITION, a bunch of late payments on file. Now guess who will have the higher FICO?

I hope I could help...

[VegasMom75]

Thank you both very much. Hubby and I have perfect pay history... no 30 days on anything as of yet. Problem is work has pretty much come to a standstill and we have depleted every cent we have trying to keep up with everything. We just can't make it anymore.

We tried to get Volvo to work with us on purchasing the vehicle but they wanted us to purchase it for the lease payoff amount which is far above what it is worth.

I am dreading the first 30 day late

[IBroke]

If you don't have any other things from blocking your filing (major purchases, tax returns etc.), I would file ASAP.

Unfortunately, redeeming a lease is not an option. In case somebody else who reads this has a loan, don't get fooled by your lender. They get what the car IS worth - not what they WANT the car to be worth. The law is quite clear on that. I will take it to CarMax and it will be the first time I'm going to be happy to get a low appraisal for my car.

As I said, if there is no prior history of late-payments on that account, it might pay off to keep it current until you file - especially when you get a clear cut Chapter 7.

So if you can, keep it current. If not, try to avoid as many accounts (credit-cards, installment loans etc.) as possible from reporting late prior to your BK. This will play a huge role on how long it will take you to get back on your feet. Again, it's the date you FILE, not the date of your discharge. On a tight budget, that makes a difference.

[rockyroad]

I tried to work with Volvo Financial as well. They said "go see your dealer."
Dealer refused to quote a purchase price until 90 days from lease expiration.
I didn't have 90 days to mess around with them because my credit was tanking fast.

Just give it back now...it will make no difference in a BK whether you owe 8K or 22K.
Now if you only had 1 more payment with no negative ramifications, that would be another story and paying it (if you could) would be wise to keep a clean tradeline.
Either way, you are responsible for a defeciency and if filing BK, at the end of day it doesn't really matter.

[TEW]

if you are getting rid of the car don't send them anymore money. just give it back. your BK will wipe out the deficiency