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Conversion of Leased Property

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  • 06-05-2013, 10:31 AM
    thegoodintent
    Conversion of Leased Property
    My question involves bankruptcy in the state of: New York

    I've recently sold some equipment that was leased that had a $1 buyout option over 6 years (I am in the 2nd year). I didn't sell all of the items, only about 40% of it, which amounted to about $20,000. I used the funds to acquire a different piece of equipment which is imperative to my business for the duration of the lease term. I am current in my payments and will be for the entire duration of the lease. I also have enough cash reserve to be able to fully pay off this item if need be but that would impact my cash flow which is why I sold off the original equipment in the first place to acquire the alternative replacement.

    The main issue is that I know that I don't have ownership of the items sold until I take title at the end of the lease duration, so if the the lessor did find out, I would be in breach of the lease contract and potentially guilty of conversion. I realize that even my act of staying current on payments and/or being able to pay this off in its entirety doesn't absolve me from the original act of mine which is in violation of the lease contract which can lead to potentially further civil action.

    I'm wondering the best course of action here. Can I ride out the payments as intended for the remainder of the 4 years, or take a different course of action?
  • 06-05-2013, 12:08 PM
    jk
    Re: Conversion Issues
    Quote:

    thegoodintent;715663]My question involves bankruptcy in the state of: New York

    I've recently sold some equipment that was leased that had a $1 buyout option over 6 years (I am in the 2nd year). I didn't sell all of the items, only about 40% of it, which amounted to about $20,000. I used the funds to acquire a different piece of equipment which is imperative to my business for the duration of the lease term. I am current in my payments and will be for the entire duration of the lease. I also have enough cash reserve to be able to fully pay off this item if need be but that would impact my cash flow which is why I sold off the original equipment in the first place to acquire the alternative replacement.
    Quote:

    The main issue is that I know that I don't have ownership of the items sold until I take title at the end of the lease duration, so if the the lessor did find out, I would be in breach of the lease contract and potentially guilty of conversion.
    sorry but that boat has already sailed. You are guilty of conversion already. The lessor discovering your activities does not make it a crime. Your actions made it a crime.


    Quote:

    I'm wondering the best course of action here. Can I ride out the payments as intended for the remainder of the 4 years, or take a different course of action?
    why do you have this in the bankruptcy section? If you are wondering if filing BK will save your butt, realize that BK does not tend to discharge debts due to criminal acts.


    I suspect that if caught, as long as you are willing to pay off the contract (whatever the remaining payments work out to be) at that immediate time, the lessor is not going to care. Their biggest problem is since you no longer have the equipment and don't have the payoff, if you choose to stop paying them, they have no equipment to repossess. That makes their work much more difficult.


    You might consider purchasing a bond to cover the payoff amount payable to the equipment owner if you renege on the contract. If you would consider that, I don't see any reason the equipment provider would care that you had sold the equipment to another.


    of course, this is with the assumption that you would have a right to sell the equipment after you paid the lease and purchased the equipment for the $1 fee.
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