Legal Question in Bankruptcy in Texas

Re: Chapter 7 Bankruptcy and computer leases

Short answer -- you probably "own" the computer in spite of the lease and it should be listed on Schedule B.

The fundamental principles of the "bankruptcy estate" are key to an answer to your question. Often, a "lease" in reality is not a true lease but in fact a disguised sale plus a security interest in the goods. My hunch is this is the case with the computer. Basically, if the "lease" allows the lessee to buy the goods for a small amount of money at the end of the lease term, or if the "lease" runs for the entire useful life of the goods, then the "lease" is really a sale.

The reason this is important is because of the concept of the "bankruptcy estate". If the computer is not really a leased good then it is personal property (which you own)and is subject to the realm of bankruptcy ("bankruptcy estate") and the power of the bankruptcy Trustee.

The issue then becomes a question dealing with the equity if any that you have in the computer. As I'm sure you are aware, computers and high tech equipment in general depreciate very quickly. I doubt there is any equity in the computer so in a practical sense the Trustee is not likely to make an issue of this particular item of the estate. Practically speaking, since the computer is not overly valuable the Trustee has broad discretion to abandon this item as part of the bankruptcy estate. (You keep it!)

Re: Chapter 7 Bankruptcy and computer leases

To be safe, list it as an asset first, keeping in mind that you have paid for the value for two years. List the balance of the contract as an executory contract. If you are going to keep it, list the owner as secured, and indicate that you are going to reaffirm the debt on your statement of intention.