We Are Going Through Bankruptcy to Get Back to Saving. – Jim

“Dear Steve,

We have been through the ringer, especially the past couple of years and have resolved to go through bankruptcy so that we can get back from minimum monthly payments to saving.

My question is, what is the best way to handle car leases in bankruptcy. We have 2 leases and after looking at our budget without emotions getting in the way, it is clear that we are spending way too much and have to give up at least one of them.

One has a higher payment and can probably be sold as the mileage is very low, but the other is a lower payment that is upside down by several thousand.

Which one should we let go? Do we have to lose both of them in a Chapter 7?


Dear Jim,

First off, BLESS YOU for getting it. For understanding that sometimes bankruptcy is necessary to get yourself back to a position of building an emergency fund and saving for retirement. It’s a message I try to drive through to people.

Ultimately you should talk to your bankruptcy attorney about handling the leases.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

trafficFrom an outside point of view the best way to handle them would be to start from a position of handing the cars back and discharging your lease debt under the bankruptcy. You might as well get the best chance of a fresh start and second chance as possible.

In that case you’d have to do the same thing myself and lots of other people have had to do right after bankruptcy, buy a couple of beater cars to get through the first year while you are rebuilding your credit. By the end of the first year you’d be in great shape to take advantage of some car manufacturer financing or even qualify at your local bank or credit union.

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But depending on how feasible that is, it seems it would make more sense to keep the higher payment car and buy one beater car. But do the math on it and see if it would be cheaper to pay off the negative balance on the other lease than pay the higher payment on the low milage car.

The key is to get right back to rebuilding your credit. Read How to Easily Rebuild Your Credit and Have Good Credit Again.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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3 thoughts on “We Are Going Through Bankruptcy to Get Back to Saving. – Jim”

  1. I had a client in the same situation. I advised him to reject the lease and let the car go back to the dealership. After discharge he will not be liable for the balance of the lease and will have a clean slate.

    Anthony McClerklin, Esq.

  2. I feel like either payment is too high but I worry about the risks in driving a beater specifically when it comes to the kids and their safety. Would there be any hope of negotiating a “refinance”? Thanks again!


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