Getting out of Equipment Lease (comercial)

[monkeyguy80]

What is the name of your state (only U.S. law)? IL

I opened a 5 year lease last year for sound and light equipment for a nightclub that was shut down a few months after opening. I'm now stuck paying the equipment lease for it because I'm listed as the personal guarantor on it even though the nightclub was Inc. I still owe about $14k and the leasing company won't let me out of the lease unless I pay the full balance or transfer the lease into someone else's name. I've already sold the equipment but it was only worth about 25% of the lease balance is. I tried to negotiate with the company and asked if I could return the equipment and they said no, it's mine no matter what because that type of equipment losses it's value quickly. I also asked them if I could settle for a lesser amount and they said no. I read through the lease and there is absolutely no mention or clause to get out of the lease. Unless there is something I can do I guess my only option is to stop paying and have it go onto my credit? I don't really want to do this as I have perfect credit otherwise, but I did check and I go into default my credit score only drops by a little bit (less then 20 points) Your thoughts?

 

[LdiJ]

What is the name of your state (only U.S. law)? IL

I opened a 5 year lease last year for sound and light equipment for a nightclub that was shut down a few months after opening. I'm now stuck paying the equipment lease for it because I'm listed as the personal guarantor on it even though the nightclub was Inc. I still owe about $14k and the leasing company won't let me out of the lease unless I pay the full balance or transfer the lease into someone else's name. I've already sold the equipment but it was only worth about 25% of the lease balance is. I tried to negotiate with the company and asked if I could return the equipment and they said no, it's mine no matter what because that type of equipment losses it's value quickly. I also asked them if I could settle for a lesser amount and they said no. I read through the lease and there is absolutely no mention or clause to get out of the lease. Unless there is something I can do I guess my only option is to stop paying and have it go onto my credit? I don't really want to do this as I have perfect credit otherwise, but I did check and I go into default my credit score only drops by a little bit (less then 20 points) Your thoughts?

If you do that, you will eventually get sued and get a judgment against you, which will cause a bigger hit than just going into default. That can also result in wage garnishment or bank account seizures.

 

[Zigner]

How did you manage to sell equipment that wasn't yours?

 

[quincy]

What is the name of your state (only U.S. law)? IL

I opened a 5 year lease last year for sound and light equipment for a nightclub that was shut down a few months after opening. I'm now stuck paying the equipment lease for it because I'm listed as the personal guarantor on it even though the nightclub was Inc. I still owe about $14k and the leasing company won't let me out of the lease unless I pay the full balance or transfer the lease into someone else's name. I've already sold the equipment but it was only worth about 25% of the lease balance is. I tried to negotiate with the company and asked if I could return the equipment and they said no, it's mine no matter what because that type of equipment losses it's value quickly. I also asked them if I could settle for a lesser amount and they said no. I read through the lease and there is absolutely no mention or clause to get out of the lease. Unless there is something I can do I guess my only option is to stop paying and have it go onto my credit? I don't really want to do this as I have perfect credit otherwise, but I did check and I go into default my credit score only drops by a little bit (less then 20 points) Your thoughts?

Am I understanding you correctly? You SOLD the equipment you were leasing? What made you think you had a legal right to sell someone else's property?

You owe for the value of the property sold (and any property remaining in your possession) and you owe for the remaining months on the lease.

You can try to negotiate with the property owner but, if sued, I do not see that you have any defense unless one happens to be found in the lease agreement.

 

[adjusterjack]

Unless there is something I can do I guess my only option is to stop paying and have it go onto my credit? I don't really want to do this as I have perfect credit otherwise, but I did check and I go into default my credit score only drops by a little bit (less then 20 points) Your thoughts?

Who did you "check that" with?

My own guess is that a default on the lease is likely to result in a 50 to 100 point drop.

And the inevitable lawsuit another 100 to 150.

On the other hand, as long as you are paying, the lessor has no incentive to give you the time of day.

But if you stop paying, well, the choice is to sue you or negotiate a discounted cash settlement.

 

[LdiJ]

How did you manage to sell equipment that wasn't yours?

Its quite possibly a capital lease, which is defined as the following:

A capital lease is a lease in which the lessor only finances the leased asset, and all other rights of ownership transfer to the lessee. This results in the recordation of the asset as the lessee's property in its general ledger, as a fixed asset.

He still shouldn't have sold the equipment, as it was collateral, but that is how he was able to do so.

 

[quincy]

Its quite possibly a capital lease, which is defined as the following:



He still shouldn't have sold the equipment, as it was collateral, but that is how he was able to do so.

That makes sense.

Not that it helps him much.