Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
Furniture acquired under a rental-purchase agreement is a lease under Florida law that a couple must assume or reject in bankruptcy, the U.S. Bankruptcy Court for the Middle District of Florida held ( In re Jack , 2017 BL 265228, Bankr. M.D. Fla., Case No. 9:16-bk-08007-FMD Chapter 13, 7/31/17 ).
Bankruptcy courts typically determine whether a lease agreement is a security agreement or a true lease by considering factors such as whether title to the property is transferred at the end of the lease term for a nominal value, Judge Caryl E. Delano wrote July 31.
Property rights in bankruptcy are determined under state law. Under Florida law, an agreement for the use of personal property for personal or household purposes for less than four months is a lease, not a security agreement, the court said.
Jeremy and Theresa Jack leased bedroom furniture and a storage bench from Acceptance Now for an initial two-month period with options for renewal or termination.
After they filed Chapter 13 bankruptcy, they treated Acceptance Now as a secured creditor with a $5,892 claim, but only valued the furniture at $900.
Under their proposed plan of reorganization, Acceptance Now’s secured claim would be paid in full, with interest over 60 months. The unsecured portion would be paid along with other creditors. It appeared that any distribution to unsecured creditors is unlikely, the court said.
Acceptance Now wanted the court to force the Jacks to accept or reject the agreement.
Bankruptcy courts that have analyzed similar laws in other states have all concluded that rental purchase agreements are true leases and subject to Bankruptcy Code Section 365, which applies to executory contracts, those not yet fulfilled, and unexpired leases. All of those purchase rental agreements must be assumed or rejected under Section 365, the court said.
The Dellutri Law Group, Pa., Fort Myers, Fla., represented Jeremy and Theresa Jack; Chapter 13 Trustee Jon Waage, Bradenton, Fla., represented himself.
To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)