Opinion
Case No. 99-20559
July 22, 1999
Kenneth L. Anderson, Lewiston, Idaho, for Debtors.
Jeanette I. Thiel, Lewiston, Idaho, for Courtesy Rent To Own.
SUMMARY ORDER
The Court has been presented with a pleading in this consumer chapter 7 case entitled "Assumption of Unexpired Lease" filed July 9, 1999 and executed by the above Debtors (though not by their attorney of record) and by an individual on behalf of creditor Courtesy Rent To Own ("Courtesy"). Accompanying this pleading is a proposed "Order Approving Assumption of Unexpired Lease" prepared by counsel for Courtesy. No notice of hearing or certificate of service was filed.
These pleadings relate to "lease-purchase agreements" (also generically known as "rent-to-own contracts") between the Debtors and Courtesy concerning a washer and a refrigerator. For the purposes of this disposition, the Court will accept the parties' characterization of these agreements as "unexpired leases."
On January 24, 1998, Debtors leased the refrigerator for 17 monthly payments of $62.95 (a total obligation, if performed and the item purchased, of $1,070.15). The "cash price" of the item, which was new at the inception of the lease-purchase, was $611.49. The agreement indicates that Debtors owe $66.60 on this lease. On September 26, 1998, Debtors leased the washer for 18 monthly payments of $43.00 (totaling $774.00). That item had a cash price of $442.26. Debtors owe $426.00 on this agreement.
Debtors schedule the obligations as "month-to-month leases" on their schedule G.
It appears that these pleadings were submitted by Courtesy's counsel for the Court's review, consideration and execution of the order, and that the parties do not anticipate any hearing or further submission. The Court declines to execute the order at this time for the following reasons.
Section 365 of the Code speaks to the ability of the trustee to assume an unexpired lease. This section does not provide authority for a debtor's assumption of a lease. Additionally, § 365(a) and (b) require Court approval of assumption, and only then upon proof of satisfaction of certain prerequisites regarding cure of defaults and adequate assurance of future performance. Rule 6006 further addresses this issue and invokes Rule 9014. Rule 9014, in turn, requires relief to be sought by motion, and reasonable notice and opportunity for hearing provided. The Court finds that the present submission is inconsistent with these substantive and procedural requirements of the Code and Rules.
The Court notes that legislation now pending before Congress addresses this point. Section 134 of H.R. 833, as passed by the House, provides for amendments to § 365 including a provision allowing a chapter 7 debtor to "assume" a lease of personal property and retain that property, upon compliance with certain conditions and notice. The proposed amendment makes clear that the liability under the lease is assumed by the debtor and not the estate.
It appears to the Court that what the Debtors want to do (and what Courtesy wants approved by order) is enter into a post-bankruptcy reaffirmation of their obligations to Courtesy under these two contracts. See § 524(c). However, the parties do not satisfy the requirements of § 524(c) or the requirements of Local Bankruptcy Rule 4008.1. Among other things, the required disclosures under § 524(c)(2) are missing from the agreement, the affidavit of Debtors' counsel under § 524(c)(3) has not been provided, there is no signed waiver of hearing in accord with LBR 4008.1. Reaffirmation is inappropriate on this record.
The Debtors' position is gleaned from their execution of the agreement and their § 521 "statement of intention" which refers to these rent-to-own contracts and proposes to "assume" the same. However, "assumption" is not one of the specifically described options under § 521(2)(A). Additionally, that section by its terms applies only to "consumer debts secured by property of the estate" (though § 524(c) is not similarly limited to only secured consumer transactions).
The Administrative Office of the U.S. Courts issues both "official forms" (which are mandatory) and "procedural forms" (use of which isn't required but is "strongly encouraged") upon promulgation by the Judicial Conference. A replacement for Procedural Form B 240 — Reaffirmation Agreement was recently issued, and a copy is attached to this opinion. The Court recommends and encourages use of this form.
While the Court will not execute the proposed Order Approving Assumption of Unexpired Lease, the parties will be allowed an opportunity, should they desire, to resubmit the matter as a reaffirmation under § 524(c) and LBR 4008.1. If that occurs, the Court will evaluate all the submissions, disclosures and declarations made in order to determine whether hearing is required and whether reaffirmation of these contracts is shown to be appropriate.
Dated this 22nd day of July, 1999.