For many California homeowners, rooftop solar was sold as a way to save money and a way to protect the environment. A salesperson knocked on the door, promised lower electric bills, and handed over a tablet to sign. Years later, many of those homeowners have a solar payment that keeps rising, savings that never appeared, and a balance far larger than the panels are worth. For some, the solar company is now out of business or in bankruptcy.
A Troubled Industry
The Consumer Financial Protection Bureau has reported that solar lenders often build hidden fees of 10% to 30% of a system’s cash price into the loan. In one CFPB illustration, a $30,000 system becomes a $39,000 loan because of a $9,000 hidden fee, before a single dollar of interest is charged. Several large installers and lenders have since gone out of business, but their loans did not go away. Homeowners are often left paying on a contract worth tens of thousands of dollars, with no one to call when something breaks.
The Gap Between What You Owe and What It’s Worth
Used solar equipment is worth very little once it is on your roof. Removing panels can cost hundreds of dollars per panel, and the resale market for used panels is small. A homeowner may owe $50,000 on a system an appraiser would value at a small fraction of that. Bankruptcy law cares about that gap.
What Is That Filing Against My Home?
Solar lenders usually file a UCC-1 financing statement with the California Secretary of State, and some also record a “fixture filing” with the county. These filings can complicate a sale or refinance. They generally lapse after five years unless renewed, but lenders often renew them.
How Bankruptcy Can Help
Depending on how your solar contract is set up, bankruptcy may let you keep your panels and pay only what they are actually worth, or walk away from them entirely free.
• Chapter 7 redemption. If you own the panels and they qualify as personal property, Section 722 of the Bankruptcy Code may let you keep them by paying the lender their current value in one lump sum. The rest of the balance can be discharged.
• Chapter 7 surrender. If you no longer want the system, you can surrender it and discharge the debt.
• Chapter 13 “cram down.” In a Chapter 13 plan, a secured debt can often be reduced to the value of the collateral and paid over the life of the plan. For example (hypothetical), a homeowner owes $53,000 on panels appraised at $2,500. Under a 60-month plan, the secured claim might be paid at roughly $50 a month, and about $50,500 is treated as unsecured debt that can be discharged.
• Leases and power purchase agreements. If you lease the panels or buy power from a solar company, you do not own the equipment, but bankruptcy may let you reject an agreement that no longer makes sense.
• Clearing your title. Experienced counsel can push to have lender filings against your home addressed as part of the case.
Why the Details Matter
Solar contracts are complicated, and they often contradict themselves. Whether your system is a loan, a lease, or a power agreement, and whether the panels count as personal property or part of the house, decides which tools are available to you. Experienced bankruptcy counsel is essential.
The Bottom Line
You should not have to pay full price for equipment worth a fraction of your balance. If a solar payment is straining your budget, an experienced bankruptcy attorney can review your contract and explain your real options.