What happens to a leased car during bankruptcy?
Leased Cars in a Bankruptcy
If you are experiencing financial challenges, it is especially overwhelming to consider the fate of your assets.
It can be difficult to identify which are safe from seizure and what solution fits your situation best.
A good solution is to speak with a Licensed Insolvency trustee in Canada.
They can assist you in identifying the optimal way out of your debt struggles.
The ideal route depends entirely on your individual circumstances.
This means that whether you should opt for a consumer proposal or a bankruptcy filing is entirely dependent on your individual situation.
Be open and honest when dealing with your Licensed Insolvency Trustee; inform them of your financial obligations, including any mortgage or lease payments.
They have a fiduciary responsibility to confidently give you accurate advice.
Resultantly, they are in a position to help you achieve financial freedom more quickly than you could independently.
Secured and Unsecured Debts
In cases of unsecured debt, there is no collateral against the amount owing.
These are the debts which can be addressed during bankruptcy.
Unsecured debt typically involves matters like lines of credit or credit cards.
These have no secure asset backing the amount owing, thus the namesake of unsecured debt.
Vehicles, however, are a type of secured debt when leased.
The car acts as its own collateral for the loan, similar to a home being collateral in a mortgage.
If you file bankruptcy, you are still on the hook for making regular lease payments in addition to maintaining active insurance.
When you meet with your trustee to access debt assistance, you must inform them of your lease agreement.
They can assist you in retaining the vehicle during your bankruptcy or proposal.
Typically, your car company wants you to continue paying regularly and is amenable to the arrangement despite bankruptcy.
Insurance and LIT Services
Whether you opt to keep your vehicle or sell it to pay off debt, when you file a proposal or declare bankruptcy, you need to retain your insurance until it is sold.
Once you have sold it and have proof of sale, you can then cancel your insurance policy.
This prevents you from being liable due to incidents while the vehicle stays in your possession.
Considering the fact that incidents regarding your vehicle have adverse impacts towards the status of your driver’s license, it is prudent to cover your bases with insurance throughout your ownership.
To get detailed information which applies to you specifically, reach out to a Licensed Insolvency Trustee today.