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Leasing vehicle prior to CH7?-critique this plan

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    Leasing vehicle prior to CH7?-critique this plan

    We will probably be filing sometime shortly after the New Year (February maybe). Right now we own these three vehicles:

    2003 Ford F-350 (Will be paid off in May 2012)
    2001 Toyota Corolla (Owned outright)
    1991 Toyota Pickup (Owned outright)

    The problem is that we just had a baby and none of them are good family cars. The pickups are regular cabs so they each only seat two people. The baby seat barely fits in the Corolla (the seat in front of the baby seat has to be up so close to the airbag its dangerous), and the stroller my MIL purchased for us does not fit in the trunk. Also, we have a chocolate lab that goes everywhere with us which is impossible in the Corolla. Long story short, my wife needs something larger. I have put my Ford up for sale and I think I can get between $10-11,000 for it. I only owe the bank $2000 at this point. The idea is to take that down payment and put it into either leasing something new or buying something used with a low payment. I will drive my wife's Corolla and keep the Toyota truck for hauling firewood which we heat our home with. Though both of those vehicles are in excellent shape mechanically they aren't worth much because of their age, mileage (both are 150K+ miles), and interior/exterior wear and tear. KBB value on the Corolla is about $3K, and the pickup they won't even rate because it has rust holes in the body, etc...I would confidently value it at $500.

    Since we have no equity in our home we would have no problem exempting the new car under federal exemptions. What I'm wondering is whether or not a leased vehicle would count toward our exemptions since we don't actually own it? For example, if we bought a new Ford Escape prior to BK and put $8000 down (what I expect to get from the sale of my truck) that is $8000 in equity we need to protect. However, if we leased a new Escape and put only $4000 down and took the other $4000 and used it to do maintenance on the Corolla and Pickup, maintenance on the house, etc...would that be the better strategy? Or can leased vehicles be seized by the trustee?

    #2
    Your presumption is correct, if you lease, you do not own the vehicle so the exemption need not apply. HOWEVER, leases have other issues, in BK, you must assume or reject the lease. If you assume the lease, you are fully responsible for the lease contract, which means that if you default after the BK, or cannot pay the overages, dings, and damage at lease turn in, you are still liable. If you reject the lease, the car goes back to the lease company. If you haven't leased before, probably not a good idea to start now, also, your credit needs to be pretty good to lease.

    Big picture, you are generally better off purchasing pre-owned than leasing.

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