Reaffirmation or Lease Assumption

Any Fort Lauderdale bankruptcy attorney knows that a consumer debtor must decide whether to reaffirm motor vehicle loans. Many vehicles are leased instead of financed. Though an issue that clients may not be familiar with, creditor and debtor attorneys have been aware that there is a confusion on the appropriate procedures for a debtor to retain a leased vehicle and to remain obligated to the lessor.

The bankruptcy code has detailed procedures and disclosures required for a debtor to reaffirm a debt. There are no real procedures for assuming a lease. So for a car lease, must or should the debtor also reaffirm the debt to retain possession, and from the lender’s perspective, keep the debtor responsible for payments?(The debtor would be responsible for a deficiency if he or she could not pay and the car was repossessed after a repossession).

There has been a split accross the country on this issue. However, recently Fort Lauderdale bankruptcy Judge Olson concluded that the reaffirmation and lease assumptions are separate procedures. Judge Olson will deny any reaffirmations on car leases since they are unnecessary. Lease assumptions are strictly between the lessor and lessee(consumer), and a lease assumption should not be filed with the court. In re Perlman, 2012 Bankr Lexis 1445(Bankr. S.D. FL April 6, 2012)(Case no 11-41597)

Considering there remains a disagreement in court decisions, one wonders whether a debtor who assumes a car lease, defaults, and is sued in state court, can defend the state court suit on the basis of lack of a reaffirmation agreement.

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