sigh - this is so confusing to me

[sofarindebt]

Okay so we have a 2001 Nissan maxima and a 2004 chevy trailblazer. The car is a loan and the truck is a lease. We gave up the car ONLY because we need a large vehicle for our 3 kids (all in 5pt. harness carseats still). We did NOT reaffirm the truck because both usbank and our attorney said we don't have to because we are current.

So, down the road a little bit here, we want something cheaper like a minivan. Could we *technically* in one year go buy something else and stop making payments on the truck and let it default? My only concern is that we will be reported to the credit agency, but can we dispute and have them change it to IIB, even a year later?

anybody know how that would work?

[HHM]

Let's back up for a second.

A lease is NOT a loan (i.e. not a debt). Let me say that again, A lease is NOT a debt.

As far as reaffirming a lease, if your current on the lease going into BK, there is NOTHING to reaffirm because you are renting a car. All lease payments are "pay in advance"...when you make your payment on the 1st of July, you are paying for the privilege to use the car for the month of July. There is really nothing to reaffirm because a lease is not a loan.

If you default on the lease AFTER your BK, you WILL be liable for any balance that is owed on the lease. Reason being, when you default on a lease, it is the moment of default that CREATES a debt. It is only upon default do you create a debt from a lease. Thus, as far as credit reporting, it would be reported as a default (not IIB) and you would be liable for any unpaid part of the lease contract.


The only time a reaffirmation is used in a lease situation is if you are in default going into the BK. Assuming you wanted to keep the car and the leasing company wanted you to keep the car, you would reaffirm that portion of the lease that is the debt (i.e. the back payments), come-up with a plan to pay those payments (and that agreement would become part of the reaffirmation), and continue making your regular monthly payments.

[sofarindebt]

wow i heard something totally different

My attorney told me not to reaffirm the lease because if something were to happen down the road, we would not be liable for any deficiency balance. When we filed bankruptcy we were behind on almost 4 payments. Now we are behind only 2 payments, and are trying to catch up. UsBank is great in working with us to get caught up, but they cannot defer any payments for us like they could on a loan. Yet they have not asked for any reaffirmation.??

[sofarindebt]

i just found this article and thought I would post

[sofarindebt]

here is the article

http://www.bankrate.com/brm/news/bankruptcy/20060307a1.asp

[HHM]

Agree to disagree.

Now, most leasing companies will let you keep the car so long as you make the payments.

As with any lease, you can "walk away" whenever you want. Simply drive the car to the dealership, etc. The key question is, what happens then...the article doesn't really address what would happen if you defaulted after the BK was discharged.

The problem here is that a lease is an "executory contract", under Bankruptcy, not a loan, the leasing company is not a creditor.

Executory contracts need to be either assumed or rejected by the trustee within 60 days of filing. A trustee never assumes the car lease because it brings no benefit to the BK estate, so the lease is considered rejected...the tricky legal issue is now what happens.

The leasing company would argue that you and it have essentially reinstated the lease by you making payments and the leasing company accepting payments. However, you would argue that the contract terminated 60 days after you filed because the trustee did not assume the lease (see BK Code 365 that talks about Executory contracts) and that you and the leasing company were simply on a month to month agreement.