New Jersey residents who file Chapter 13 bankruptcy must choose one of the two options available to them if they are leasing a car at the time of the filing. Debtors can either continue making payments on the lease or take the vehicle back to the dealer. Before making a decision, the debtor should understand the pros and cons of each decision.

Chapter 13 bankruptcy is a long-term process that provides debtors with the opportunity to repay much of the debt they owe. This provision of bankruptcy law allows debtors to partner with a trustee to create a repayment plan they will follow for either a three- or five-year term.

Chapter 13 provides payers with a way to keep ownership of their possessions, but there are times when a debtor will decide the costs to keep certain items are not worth it. This scenario could be the case with a leased vehicle.

Debtors who are current on their car lease and decide to keep the vehicle may find two points of concern as far as the Chapter 13 filing. First, automobile lessees are responsible for damages and overages when leasing a car. If payments are due before the Chapter 13 bankruptcy runs its term, permission from the court is needed to address the extra payments. Permission is also needed to purchase the vehicle being leased or make other financing arrangements for a car when the lease ends before the bankruptcy discharges. Debtors who are behind on their lease but want to keep the vehicle will need to pay current, future and past-due notes as part of the repayment plan under Chapter 13.

Individuals who choose to let a leased vehicle go as part of their Chapter 13 bankruptcy filing will no longer be responsible for paying the remainder of the lease amount. However, all fees and penalties incurred due to the lease rejection become part of the Chapter 13 repayment plan.

Chapter 13 bankruptcy filings provide relief to individuals overwhelmed by the debt they have accumulated. However, bankruptcy laws can become difficult to navigate for individuals unfamiliar with the process. Individuals considering a bankruptcy filing for debt relief purposes may benefit from speaking with an attorney.