Can I Keep a Leased Car in Bankruptcy?
Yes, when you file bankruptcy in Canada it is possible to keep your leased vehicle under certain conditions. As your car loan is a secured debt (it is “secured” by the equity in the vehicle) you will not have this debt included in your bankruptcy.
If your payments are up to date, and you would like to maintain the payments and can afford to do so you may keep your vehicle. The lending company has to agree to allow you to continue making payments, but if your loan payments are current they are likely to agree.
Your car loan likely has a clause that states “in the event of insolvency, the leasing company can terminate the lease, and repossess the vehicle.” However, this is unlikely to happen if your loan payments are up to date, as the lending company would like to keep receiving your payments.
Before going bankrupt, you should review your lease paperwork and talk to your leasing company if you would like to keep your vehicle. They will likely allow you to keep your vehicle, but it is always good to confirm.
Even if you can keep your car, you should consider whether you should keep your car or not.
Keeping a Leased Car in Bankruptcy
A car can be an expensive thing to own and if you have to go bankrupt, you should consider if you can afford the expenses of a car. Surrendering your car can be a good idea as you won’t have the monthly expenses of a lease payment, insurance, gas, maintenance and on-going repairs. You could use public transportation or purchase a more affordable used car. This can help reduce your monthly expenses.
What if I Own my Car?
The rules regarding whether you can keep your car that you own varies from province to province so we recommend speaking to a Licensed Insolvency Trustee to learn more. The Trustee will help you explore your options and whether you will be able to keep your car. If you have significant equity in a vehicle you might want to consider a consumer proposal instead.
Your Trustee can help you explore all options, including bankruptcy and filing a consumer proposal.