An individual chapter 7 debtor cannot assume a lease of personal property by reaffirming the debt under Section 524(c). For example, a debtor can only assume a car lease by assuming the lease under Section 365(p), according to Bankruptcy Judge Benjamin P. Hursh of Butte, Mont.
Consequently, a lawyer concerned that the client is assuming a lease inadvisably cannot invoke the court’s scrutiny by filing a reaffirmation agreement.
The debtor wanted to keep her 2019 automobile but owed almost $10,000 on the lease. The lessor was evidently willing to allow assumption, but the debtor’s counsel said that “his strong preference is to obtain the Court’s approval by submitting a reaffirmation agreement related to the lease sought to be assumed,” Judge Hursh said in his February 12 opinion.
By invoking reaffirmation, the agreement would be subject to “intense judicial scrutiny,” Judge Hursh said. The court’s review would “ensure that a debtor bound by a reaffirmation agreement is aware of the legal consequences associated with the agreement and, if a debtor is pro se, ensure that the agreement does not impose an undue hardship on the debtor and is in their best interest. § 524(c)(2)–(6),” the judge said.
“Such statutory requirements appear nowhere in § 365(p),” Judge Hursh said, referring to the provision in the Bankruptcy Code enabling an individual chapter 7 debtor to assume a personal property lease that was not assumed by the trustee. Assumption can be achieved under Section 365(p) without court intervention.
Judge Hursh said that Sections 524(c) and 365(p) “describe two separate processes . . . that are independent of one another.” Section 365(p), he said, “does not place any responsibility on the court to ensure that, for example, assumption of the lease is in the debtor’s best interest or that it does not impose an undue hardship on the debtor.”
“Those determinations are left to the parties,” Judge Hursh said. “Absent any indicia of congressional intent to permit debtors to assume leases according to the procedures set forth in § 524(c), this Court is reluctant to do so,” he said.
Judge Hursh denied the application to approve the reaffirmation agreement, because “the procedure (i.e., compliance with § 524(c)) utilized by the parties to accomplish their collective goal of assumption was unnecessary. Instead, the provisions of § 365(p) are applicable.”
An individual chapter 7 debtor cannot assume a lease of personal property by reaffirming the debt under Section 524(c). For example, a debtor can only assume a car lease by assuming the lease under Section 365(p), according to Bankruptcy Judge Benjamin P. Hursh of Butte, Mont.
Consequently, a lawyer concerned that the client is assuming a lease inadvisably cannot invoke the court’s scrutiny by filing a reaffirmation agreement.
The debtor wanted to keep her 2019 automobile but owed almost $10,000 on the lease. The lessor was evidently willing to allow assumption, but the debtor’s counsel said that “his strong preference is to obtain the Court’s approval by submitting a reaffirmation agreement related to the lease sought to be assumed,” Judge Hursh said in his February 12 opinion.
By invoking reaffirmation, the agreement would be subject to “intense judicial scrutiny,” Judge Hursh said. The court’s review would “ensure that a debtor bound by a reaffirmation agreement is aware of the legal consequences associated with the agreement and, if a debtor is pro se, ensure that the agreement does not impose an undue hardship on the debtor and is in their best interest. § 524(c)(2)–(6),” the judge said.
“Such statutory requirements appear nowhere in § 365(p),” Judge Hursh said, referring to the provision in the Bankruptcy Code enabling an individual chapter 7 debtor to assume a personal property lease that was not assumed by the trustee. Assumption can be achieved under Section 365(p) without court intervention.