Debtor’s Furniture Rental Agreement Is Lease to Assume or Reject

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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

To contact the editor responsible for this story: Jay Horowitz at

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