OK - Im sorry - but final decision on my car lease - help?!

[sh9730]

Ok,

My head is spinning, but I am finally ready to make the final decision on whether to keep my car lease or not. I indicated in my SOI that I intended to "assume" (my attorney actually typed this on my SOI as it wasnt an actual choice on the form) the lease and keep the car. But, I was behind on the payments and hoped the lender would work with me to lower or extend the lease etc before I signed. Ally financial is the lender. Ally sent what they call a "reaffirmation of lease agreement" to my attorney and he had it with him at my 341 hearing. My intention at that time was still to get Ally to either work with me on the late payments etc..or let the car go.

BUT, Ally is unable or unwilling to change any of the lease terms while I am in the BK. They say its sign the agreement or thats it. As a result, I resigned myself to the fact that I would surrender the vehicle.

However, then after looking at the options I had to get anything but a "beater" car, I started to rethink this position. I MUST have a reliable car for work, so a $2000 car just isnt an option for me. When I started looking into "second chance" loans etc. it turns our my monthly payments due to the high interest etc would be the same as my current lease payment for a car with 75-100K miles instead of the 6K my car now has? Plus I would need as much for a down payment as just bringing my lease current.

Anyway, so now Im thinking Im just going to keep the car. Here are my questions:

#1 - My atty (and what I have read here say I must sign and file this agreement with the court within 30 days of my 341 - but ALLY says I have until discharge? Anyone know which is right?

#2 - As I stated above, ALLY has sent this "Reaffirmation of Lease Agreement" to sign instead of a "Lease Assumption" agreement? The ALLY guy says its the same thing, but?

#3 - My understanding is that this process only requires FILING with the BK court, not APPROVAL. Is that correct?

#4 - I ve read online that for lease assumptions, even those that are signed, there is no legal responsibility for the debt? If so, what is the point of signing the agreement?


Thanks in advance. My main concern is I dont want to give ALLY the back payments and then have them take the car anyway! Next much lower issue is I dont really want to draw any unwanted attention to my case with the BK court, so would prefer this is just a matter of filing rather than approval.

[jetsfan2010]

would you qualify for the BK(means test) if that car payment wasnt in the picture?

[debee]

#1 - Lease assumptions are covered under 11 USC 365(p). This may be the 30 days your attorney was referring to:

"(A) ... the debtor may notify the creditor in writing that the debtor desires to assume the lease. Upon being so notified, the creditor may, at its option, notify the debtor that it is willing to have the lease assumed by the debtor and may condition such assumption on cure of any outstanding default on terms set by the contract.
(B) If, not later than 30 days after notice is provided under subparagraph (A), the debtor notifies the lessor in writing that the lease is assumed, the liability under the lease will be assumed by the debtor and not by the estate."

#2, #3, #4 - A reaffirmation agreement is not the same as a lease assumption. Reaffirmations are governed by section 524 and require court involvement. Assumptions are governed by section 365 and do not. Reaffirmations waive the discharge as it pertains to that debt. Assumptions do not.

However, at least one court has ruled that an assumption is a species of reaffirmation (putting debtor back on hook & requiring a hearing to determine whether or not the agreement constitutes undue hardship). Some courts have ruled that you are not personally liable after merely assuming a lease, but that you are liable if you reaffirm.

I haven't read a lot on this topic. In re Eader is here. (ETA: Court rules that even if debtor signs assumption agreement that stipulates he waives the discharge, it is not waived unless a reaffirmation is filed according to the procedures outlined in 524 & frbp 4008)Here's another one where the judge refuses to stipulate that the debtor is liable. Here's another one.

I would seek your attorney's counsel on this because he will be familiar with local rulings on this issue.

[sh9730]

Thanks all,

I ended up going into atty's office this afternoon and signing the reaff.

It IS a reaff agreement, but in th first line of the cover sheet to the attorney it says the lender is "willing to have the subject lease assumed by the debtor subject to the attached REAFFIRMATION agreement." Then all the official paperwork to be filed with the court is just a standard REAFFIRMATION agreement, but all the sections related to interest, amount paid for collateral etc. all say "N/A - Lease".

It also explains that they are allowing me to get current with past due payments prior to my discharge - actually they have a payment plan to catch up the arrears with the last payment due on 7/28 (I SHOULD get discharged on 8/3) but Im just going to bring it all current right away....

Other than that initial reference to assumption in the cover letter to my attorney though, the word assume is nowhere to be found. But, the numbers are all right and it only indicates that I am responsible for the same lease payment and amount that I always was, so Im comfortable with it. As I said, I would have ended up spending the same 2K I will use to get myself current on this, as a down payment on a much older car with no warranty and at a very high interest rate. Yes, in the end I would have something I would OWN if I went the other route, but this way I have a warranty etc for the entire three years so I shouldnt have any large unexpected expenses related to a car.

Also, Ally SAYS that with the reaff they will report to the credit bureaus, but Im sure I ll have to hold them to that later.

Oh, and of course the court may not just rubber stamp it? If they dont, as I understand it I should be able to ride through with them as I will have made "every effort" to reaff.

So, at least I dont have to think about this part of things anymore....papers are on the way to lender to be filed with court - wierd that THEY do it rather than my atty, but no biggie...

Thanks again for the answers!

[debee]

If they dont, as I understand it I should be able to ride through with them as I will have made "every effort" to reaff.

It will be interesting to see if it plays out like this for lease reaffirmations since the car belongs to someone else and you only acquire a right to use it with the lease, as opposed to personal property reaffirmations in which you are the owner and the creditor is merely a lien-holder. I'm thinking 521(a)(6) won't apply. Keep us posted.

[Pandora]

okay maybe I'm not understanding something...but ya'll know me.. gotta ask .

Why would you continue your lease, catching up past arrears and continuing making payments on a vehicle that you have to turn back in anyway? If you have / had the option to purchase a vehicle vs. leasing, with no back payments due, and roughly the same monthly payment... why wouldnt you do so? There are new to 1/2 year old vehicles that are still under factory warranty out there available for purchase, many times at much less than a lease payment.

Leasing vehicles has always been puzzling to me to say the least; you basically "rent" a vehicle for the same amount (or more sometimes) as you could to outright own one. You have to watch the mileage, excess wear and tear, etc...and then you end up still owing a balance at the end of your lease and must decide to actually purchase said vehicle for balance OR - let it go back to dealer, resulting in you needing another car.

Seems like a no brainer to me... but I"m sure those that lease will explain the benefits of leasing for them (although I see none myself)

[sh9730]

Pandora,

Well, for the NON CREDIT CHALLENGED people, leasing offers a lower payment for more up front car (i.e. lower payment for nicer car). It has also been shown that many people dont keep their car out til loan payoff and just keep adding the upside down amount to their next loan. So for those people (I fall into that category), that are never keeping their cars more than a few years anyway, leasing can make sense as long as you dont go over the mileage limit etc. (I dont ever come close to mileage limits). Basically since a lot of people never stop having a loan payment anyway, they prefer the ability to always have a newer car etc, even if they never really "own" anything.

Yes, there is the option to buy the car at lease end, but most people that lease dont do so. But when you do purchase, you have the advantage of buying a car that YOU have owned and maintained and know the vehicle history.

Again, the above is for people in NORMAL credit circumstances. Im not saying it is or isnt a good idea, just was explaining the thought process.

NOW, in my particular circumstances I leased the car originally based on the stuf I talked about above, with no intention of filing BK within 6 months of purchase. But, now that I am here, the choice was take the 1800.00 (wasnt even 2K) to catch up the lease payments and then have an almost brand new car with 6K miles for the next 3 years (it was originally a 39 month lease), OR take that 1800 and either a). buy a total piece of junk that could suffice for awhile til I saved up another chunk of money to get something better when my credit improves - this was not an option for me as I MUST have reliable transportation, or b). use that 1800 as a down payment on another car from either a big name dealer or the corner lot - with interest rates near 20%. At those rates, with the down payment I had, that would allow me to only afford a car about 5 years old, with at least 75K miles for the same payment as my lease. And although that would be better/safer than the complete junk car for 1800.00 with no payment, even then with 75K miles I am taking risks of unexpected repairs etc...whereas for the same monthly payment on my lease I have a car that is completely under warranty for the entire time. Of course, if I were to buy the 75K miles car I would actually own a car in the 3 years, but it wouldnt be worth all that much by then and I would need a new car anyway, or pay the unexpected repair bills that a higher mileage car would come with.

SO, in the end, for my personal situation, it was better to reaffirm the lease.

Debee, yes it will be interesting to see....when I spoke with the BK dept at Ally this morning, I asked what happens if I pay the arrears, and the court never approves the reaff agreement. She basically said they will do a stay and pay after that as long as I have made every effort to reaffirm. My concern of course was I didnt want to give them the 1800.00 today only to have them repo anyway after discharge if the court doesnt approve the reaff. She said they wouldnt. If true, that would be nice because then of course it would be just like the mortgage non-reaffirmed process. Benefits, without risk. I am of course risking 1800.00 to see what happens as Im sure that money will be gone no matter what they do in the future. But they CLAIM they dont want the car back. Also, they SAY they will report as current to the credit bureaus, but if the reaff agreement isnt approved Im not sure what will happen on that front.

Thanks again for the responses all.

[debee]

Debee, yes it will be interesting to see....when I spoke with the BK dept at Ally this morning, I asked what happens if I pay the arrears, and the court never approves the reaff agreement. She basically said they will do a stay and pay after that as long as I have made every effort to reaffirm. My concern of course was I didnt want to give them the 1800.00 today only to have them repo anyway after discharge if the court doesnt approve the reaff. She said they wouldnt. If true, that would be nice because then of course it would be just like the mortgage non-reaffirmed process. Benefits, without risk. I am of course risking 1800.00 to see what happens as Im sure that money will be gone no matter what they do in the future. But they CLAIM they dont want the car back. Also, they SAY they will report as current to the credit bureaus, but if the reaff agreement isnt approved Im not sure what will happen on that front.

I think you're right. If the court doesn't approve the reaff, you'll just be in an assumed lease. So you'll get what you want along with the protection of a contract, but without losing the benefit of your discharge.

[Pandora]

sh9730 -

Thanks for giving in-sight; I've always wondered what the benefit of leasing is, so I suppose for some, it's better for them in one aspect. I can see military members doing leases (and I know many do) due to being on assignment for a 3 year stint at a time vs. having to sell the car or pay to have it shipped. So in that respect, I can see the benefit of leasing. I have to disagree that most people borrow against their vehicle's value (guess you're talking title loan?); we've never done it and no one I know has done it - but it would be interesting to see the actual numbers of those that do. Not that there's anything wrong with it and I know many are in situations where a medical emergency or some other situation has occurred, but for me personally, I would be terrified to create a situation where my paid off vehicle could possibly be taken from me. We have always kept our vehicles until they either cannot be fixed any longer or it becomes more costly to fix than market value, then purchased another one.

Appreciate you taking the time to allow me & others to see it from another perspective

[sh9730]

Pandora,

Welcome. But Im not sure where you read that I was saying "borrow against the vehicle's value"? What I was saying is (and the auto industry has studied this alot), is that MANY people, who PURCHASE (but finance) a new vehicle, rarely keep that vehicle out until the loan is paid off. More often they trade it in for ANOTHER new car, before the loan term is completed, often in an upside down situation, and they just tack on that defiency to the new car loan.

So, what I was saying is that since the above is the case, and many people just have "continous" auto loan payments (since they trade it in for another vehicle etc..), some people just accept that fact that they will always have a car payment. As a result of that feeling, they would rather get a little more expensive vehicle by leasing, rather than purchase financing.

[Pandora]

Gotcha - misread on my part - my apologies.