This paper discusses how to schedule and effect the treatment of an automobile lease in a Chapter 7 bankruptcy case.
When a Chapter 7 bankruptcy petition is filed, the trustee takes control of all the assets of the estate, including the debtor’s rights under any unexpired lease. According to section 365(a), the trustee may either assume or reject the debtor’s interest in an unexpired lease. The debtor has no authority to exercise the option of assuming or rejecting the lease. The debtor is required to list an unexpired auto lease on Schedule G, and also to file a statement of intention with respect to the retention or surrender of the property. Shortly after the filing of the Chapter 7 petition, the debtor will obtain a discharge from the vehicle lease payment obligations. The discharge injunction of section 524(a) will enjoin the lessor from any act to collect lease payments from the debtor.
Several issues arise in Chapter 7 concerning a debtor’s unexpired automobile lease. These issues include the dischargeability of the debt, the effect when the trustee assumes or rejects the lease, and options for a lessor when the lessee files Chapter 7 bankruptcy.
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