SAN DIEGO — After a year of testing and development, LEAP Auto Loans revealed a new program that allows the company to work with lenders to mitigate their losses on defaulted auto loans and allow consumers to keep their vehicles.

LEAP has launched a new leasing program that caters to consumers facing repossession or bankruptcy.

 "While there has been a lot written about mortgage modification solutions, we realized there was a void in the auto lending space for this type of product," explained Tim Condon, president and founder.

"LEAP's value proposition works for both the lender and the consumer in repossession or bankruptcy situations. Sometimes, the lender faces restrictions in their ability to modify auto loans. We save both the lender and the consumer money in difficult circumstances," Condon added.

In 2009, LEAP was established by a team auto finance professionals with non-prime auto lending experience.

"During the economic crisis that began in 2007, we realized that there was a need to provide auto loan borrowers with workout solutions to help them meet their obligations as their circumstances changed," management explained on its site. "Many lenders are constrained in their ability to reduce auto loan payments due to regulatory restrictions, debt covenants and internal policies.

"Our objective at LEAP is to make a settlement offer that is good for the lender and the customer, and still provide a good return for LEAP investors. With many years of industry experience and strong financial backing, we are able to offer flexible settlement options to buy the vehicle from the lender and lease it back to the customer," management continued.

Officials went on to point out, "Some customers presently have no vehicle or are unable to reach a settlement agreement with the lender. In these circumstances, LEAP is sometimes able to approve qualifying customers to get another vehicle."

Management said the company has the capability to do business in most states.

Explaining the program in more detail, Condon wrote via a blog on the site, "In the past few years the credit landscape has changed dramatically, and auto lending is no exception. Prior to the credit crisis that began in 2007, many consumers emerging from bankruptcy were able to obtain financing for another vehicle. The current credit climate makes it much more difficult to get credit approval for an auto loan post-bankruptcy. Therefore, decisions made in bankruptcy regarding auto debt have become increasingly important."

The debtor has three options with auto debt in Chapter 7 bankruptcy:

—Reaffirmation: Where the debtor reaffirms the terms of the auto debt to avoid surrender of the vehicle. Although common, it is often not in the borrower's best financial interest to reaffirm, Condon noted.

—Surrender: Debtor turns the vehicle in to the lender to resolve the auto debt.

—Section 722 Redemption: Debtor pays fair market value for the vehicle, and the deficiency balance is waived. This alternative is not usually pursued as the debtor has no money.

"Reaffirmation of the auto debt is done about half the time. Almost all of the remaining population is surrendered. Very few debtors redeem the vehicle for the obvious reason that they do not have the money," Condon pointed out.

Ultimately, the company outlines in its core values that, "We behave in a responsible way and are committed to adding value in every transaction. This means that our settlements with lenders are fair and represent a better alternative than repossession. It also means that we do not just give the vehicle back to the customer. The revised lease or loan structure must fit the customer's present circumstances. We reduce payment and amount due on every transaction, or we do not close it. We do not charge the customer a fee for structuring the settlement. Many times, we simply provide free advice and the customer is able to work out his loan with the lender and move on."

LEAP is principally owned by Austin Ventures, a venture capital and private equity group with 25 years of experience and more than $4 billion in managed funds.

The company is also a member of the American Financial Services Association and is represented on the Auto Finance Advisory Board.