What Happens if You Stop Paying Your Car Lease After a Reaffirmation?

Not all bankruptcy cases will allow for a reaffirmation.

Not all bankruptcy cases will allow for a reaffirmation.

A person who goes through bankruptcy may be able to keep a car they're leasing in some situations. Being allowed to keep the lease despite declaring bankruptcy is known as a reaffirmation, and it can only be granted by the bankruptcy court judge. Once the judge approves the lease or loan reaffirmation, the borrower is still subject to the same terms as the previous agreement. Failing to make payments on a reaffirmed car lease it is no different than failing to make payments on the original lease.

Reaffirmation

Once a bankruptcy court judge approved a reaffirmation, the borrower is still required to make regular payments under the terms of the lease. Just like the original lease, the lender will report all lease payments made to at least one consumer credit reporting agency. These agencies maintain consumer credit reports, and the agency will record the consumer's lease payments in the report.

Repossession

If you fail to make payments on a reaffirmed car lease, the lender has the right to take repossession of the vehicle in the same way it did under the terms of the original lease. Failing to make a single timely lease payment typically allows the lender to repossess the vehicle, though the terms of the lease may require multiple missed payments. The lender must repossess the car peacefully, but it is otherwise allowed to take possession of the car when the borrower fails to meet the terms of the lease.

Credit Score

A single late lease payments can damage your credit score. While the bankruptcy can allow you to start over financially, your credit score is likely already low because of the bankruptcy. Once you emerge from bankruptcy, however, your credit score can still suffer if you take further negative credit actions, such as failing to make timely lease payments. A lender repossession will also further damage your credit score.

Preventative Steps

Many automobile lenders may be willing to work with you if you know you will miss a payment or will otherwise not be able to make a payment on time. If you know in advance that you will not be able to make a lease payment, contact the lender and at least let him know. Lenders are not always eager to go through a repossession, and if you can negotiate either a new payment plan or provide larger payments to make up for the missed payment, you may be able to avoid any negative actions and prevent further damage to your credit report.

About the Author

Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.

Photo Credits

  • Jupiterimages/Polka Dot/Getty Images