Toyota Awaits Appeals Court Ruling on Auto Leases in Bankruptcy

Renewing car leases during consumer bankruptcies could get more expensive for auto financing companies under a case now pending against Toyota Motor Credit Corp. in a federal appeals court.

At issue is which of two bankruptcy code provisions govern when a consumer debtor wants to keep a leased vehicle after filing for Chapter 7 protection rather than wiping the debt away – and losing the car in the process.

Most courts have said that signing a simple lease assumption agreement is not enough and that auto lenders must also get the debtor’s signature on a more detailed reaffirmation agreement that ...