Disguised Installment Sale Law and Legal Definition

Disguised installment sale refers to a debtor’s leasing coverage that tries to keep property outside the bankruptcy estate. Under disguised installment sale, a lease either presents the lessee-debtor with a bargain purchase option or it transfers title to the lessee-debtor at the end of the lease term.

Under disguised installment sale, when such a lease is discovered, the property is treated as part of the bankruptcy estate. It also tries to defeat competing creditors, whereby, the lessor must have perfected a security interest.