Reaffirming A Lease In Bankruptcy

: Chris Lee Law Firm

  Filed under: Bankruptcy

car leaseWhen filing for Chapter 7 bankruptcy there are some asset and property possession issues to be considered. In general, any secured debt asset may be at risk of seizure or repossession by the creditor in a Chapter 7 bankruptcy unless the debtor agrees to reaffirm the lease after the debts are discharged.

Lease Agreements

Reaffirming a lease essentially means that the debtor enters into a written agreement with the lender to resume payments on the lease contract as soon as their debts are discharged in bankruptcy. This means that the debt that is included in the reaffirmation agreement would not be included in the Chapter 7 discharge, leaving the debtor responsible for repaying the debt after bankruptcy if they wish to keep the property. Failure to reaffirm the lease or resume payments as part of the reaffirmation would leave the debtor at risk of having the asset or property repossessed by the creditor.

Lease reaffirmations are typically used for protecting a vehicle in Chapter 7 bankruptcy. By reaffirming their lease agreement with the vehicle creditor they can keep the car and resume payments after their case has been completed. Complications from a reaffirmation agreement arise when the debtor fails to maintain the payments after bankruptcy or the creditor does not approve the agreement in writing. In either case, the best thing to do is to surrender the vehicle to the lender to terminate further repayment obligation.

 

 


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