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Auto Lease Assumption in Chapter 13

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  • Auto Lease Assumption in Chapter 13

    When my Chapter 13 100% plan was filed, it was setup to handle my Auto Lease outside of bankruptcy and to assume the lease. Mortgage also handled outside Bankruptcy.

    I didn't file any paperwork to assume the lease, I don't know if my lawyer did. Is there anything that would have had to be done?

    When I go to the lease website, all looks normal, payments being made with a normal balance as expected. The say they are reporting to credit bureau as normal.

    Now on my credit reports a different story.

    After discharge, Experian zeroed out the balance on the lease, closed the account and said it was included in bankruptcy. When I disputed it, they didn't change anything and didn't give explain why.

    Transunion showed the same, zero balance and closed. When I disputed it with them, they deleted the lease all together off my report.

    I haven't disputed Equifax yet.

    Same think is happening with my Mortgage which was handled outside of bankruptcy, account closed and zeroed out. Experian did nothing on dispute and Transunion deleted my mortgage.

    I've never missed a payment on lease or mortgage and they would help my credit. Did me or my lawyer do something wrong.

  • #2
    Your mortgage and lease were part of your bankruptcy even if you made the payments directly.

    Check your confirmed plan and other documents filed in your case to see if you assumed the lease. Here's a good explanation of how leases are handled in a Chap 13:

    If you rejected the lease, then your obligations were discharged, even if the lessor has allowed you to keep the car and continue to make payments.

    Experian and Transunion did not zero out the lease balance. The creditor did. This is an indication that you did not assume the lease. Since your obligation under the lease is discharged, it is correct for your credit report to show a zero balance. I suspect the creditor did not respond to your Transunion dispute, which is why it was removed. It may appear again. If you were told that they were reporting the lease on your reports and enough time has passed for that to show up, you might want to follow up and see if you can get them to start reporting it. But, they have no obligation to do so.

    The mortgage is different. If you did not surrender the property, then a home mortgage is not discharged in BK, unless it is a second mortgage that was stripped. However, this seems to be commonly misunderstood. I have heard that many mortgage companies will show a mortgage as discharged with a zero balance after a Chap 13. I was never late on my mortgage and I made the payments directly during my Chap 13. During my Chap 13, it showed on my credit report as included in BK. Bank of America changed that after my discharge and is now reporting on my credit reports as if the BK never happened. If your lender does not update their reporting, getting them to correct may or may not be to your advantage. If they think the debt is discharged, that could be a good thing if you have to default later and you are in a recourse state. If you are in a no-recourse state and they can't sue you for deficiency, disputing the entry is probably a good idea if you aren't worried about them reporting any future default on your credit report.
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


    • #3
      Thanks for responding. Below is from the confirmed plan. Does anything need to be done outside of this? I'll call Honda on Monday and see how they are reporting. Their website looks completely normal showing my payments and showing a balance. I can understand a credit mixup on the mortgage because my mortgage filed a claim against arrears in the escrow account. I was just paying the larger payment like mortgage companies let you do. When that claim was paid off, the balance on that arrears was zero, but I think it probably go sent to the credit agencies as the mortgage being zero. Just speculation, but at least that one makes sense to me. I'm not worried about ever, ever having credit issues again, so it would be great if I could get my mortgage and lease to show normally.

      ================================================== =====

      The debtor assumes all unexpired leases and executory contracts listed in Section G of this
      plan; all other unexpired leases and executory contracts are rejected. Both assumption and
      rejection are effective as of the date of plan confirmation.
      Section G. Notwithstanding anything to the contrary set forth above, this Plan shall include the provisions
      Special set forth in the box following the signatures. The provisions will not be effective unless there
      terms is a check in the notice box preceding Section A.
      Special Terms [as provided in Paragraph G]
      All claims filed after the bar date will not be paid by Trustee.
      Wells Fargo Home Mortgage: Debtor will make monthly mortgage payments for xxxxxxxxxxxxx outside of the plan.
      American Honda Finance: Debtor will assume the lease on the 2014 Honda Accord.



      • #4
        Yes, call Honda and see if you can get them to change their reporting. I had a Honda loan that was paid through my plan. After I filed, Honda reported my account as closed with a zero balance. It is a positive entry on my reports. They have not reported again since I filed. Check the date the account was last reported.

        No creditor is required to report anything on your credit reports at all. They may prefer not to report loans that existed before BK to avoid risk of being sued for violation of the bankruptcy court's injunction for collection. It's easier for them to just not report any debt that existed pre-BK than it is to look at each case and determine whether the debt was discharged.

        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


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