A lease assumption agreement is a legal contract a bankruptcy debtor can use to keep a leased vehicle after a Chapter 7 bankruptcy case. A Maryland bankruptcy attorney or a Washington DC bankruptcy attorney can help guide you through the process of signing a lease assumption.
A lease assumption agreement is necessary if you are leasing a car when you file Chapter 7 and you want to keep it. One thing many debtors may not realize, however, is that once you sign a lease assumption agreement, you cannot rescind it – the contract is binding. If you sign the lease assumption but default on your car payments after your bankruptcy is over, you will be responsible for the original lease contract as if the bankruptcy had never happened.
Reasons why a debtor would not assume a car lease:
- The payment is too high for the debtor to afford. Debtors should not assume vehicle leases for luxury vehicles or vehicles with high payments, and the bankruptcy court may not allow it.
- The debtor is behind on the lease payments. Many car creditors will not accept a lease agreement if the debtor is behind on payments, and even if the creditor does accept the agreement, the debtor is responsible to catch up on the arrears.
- The debtor is already over the mileage limits for the lease or will be over mileage when the lease is ending. A Chapter 7 bankruptcy can give you the chance to walk away from the lease without paying for excess miles. When you surrender your leased car in Chapter 7 bankruptcy, you are no longer responsible for excess mileage or excess wear and tear in most circumstances.
Reasons why a debtor might assume a car lease:
- The payment is low. Once you file your Chapter 7, getting another car loan right with a good interest rate and low payment away might prove difficult.
- You are current on the payments.
- You intend to purchase the vehicle at the end of the lease.
A Chapter 7 bankruptcy could be an opportunity to get rid of a money-sucking vehicle lease. If you are considering Chapter 7 and have a leased vehicle, consult with an experienced Maryland Bankruptcy attorney who has bankruptcy information and knowledge. Contact an attorney today for a consultation.