Kevin Anderson

UNITED STATES BANKRUPTCY COURT

DISTRICT OF MASSACHUSETTS

EASTERN DIVISION

Inres ti tt—sSS Chapter 7

) Case No. 19-11221-MSH

KEVIN ANDERSON, )

Debtor

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MEMORANDUM OF DECISION REGARDING ASSUMPTION AND

REAFFIRMATION OF MOTOR VEHICLE LEASES

The process of personal property lease assumptions by individual chapter 7 debtors is

governed by section 365(p)(2) of the Bankruptcy Code,' which provides in subpart A: “the

debtor may notify the creditor in writing that the debtor desires to assume the lease” and “[uJpon

being so notified, the creditor may, at its option, notify the debtor that it is willing to have the

lease assumed by the debtor and may condition such assumption on cure of any outstanding

default on terms set by the contract.” Bankruptcy Code § 365(p)(2)(A). Subpart B states that: “Tf,

not later than 30 days after notice is provided under subparagraph (A), the debtor notifies the

lessor in writing that the lease is assumed, the liability under the lease will be assumed by the

debtor and not by the estate.” Bankruptcy Code § 365(p)(2)(B).

Here, the debtor, Kevin Anderson, filed a motion to compel USB Leasing LT to allow

him to assume a lease of a 2017 Jeep Wrangler under § 365(p)(2). According to Mr. Anderson’s

motion, there were no overdue payments under the lease, yet when he wrote to USB Leasing

offering to assume the lease USB Leasing responded that it would agree to a lease assumption

only on the condition that he enter into a reaffirmation agreement pursuant to Bankruptcy Code§

' All references to the Bankruptcy Code or Code are to 11 U.S.C.§ 101 et seq.

EEO

524(c). In his motion to compel, Mr. Anderson asked me to invoke the court’s equitable powers

under Code § 105 to force USB Leasing to enter into a lease assumption agreement without the

precondition of reaffirmation. Mr. Anderson maintained that conditioning a lease assumption on

reaffirmation was an “incorrect procedure.”

USB Leasing filed a response to Mr. Anderson’s motion to compel essentially saying it

needed guidance on how to deal with consumer car leases in bankruptcy because there is no

binding First Circuit authority delineating the interplay between lease assumptions under Code §

365(p)(2) and reaffirmation under § 524(c). In the absence of such authority, USB Leasing stated

that its policy was to rely on In re Creighton, 427 B.R 24 (Bankr. D. Mass. 2007), the only

reported decision by a court in this district. In Creighton, the bankruptcy court ruled that the

lease assumption under § 365(p)(2) was a species of debt reaffirmation and in order for the lease

assumption to be effective, the parties were required to comply with the reaffirmation provisions

of § 524(c).2 Id. at 28.

Bankruptcy Code § 524(c) provides:

(c) An agreement between a holder of a claim and the debtor, the consideration for

which, in whole or in part, is based on a debt that is dischargeable in a case under this title is

enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or

not discharge of such debt is waived, only if--

(1) such agreement was made before the granting of the discharge under section 727 .

.. of this title;

(2) the debtor received the disclosures described in subsection (k) at or before the

time at which the debtor signed the agreement;

(3) such agreement has been filed with the court and, if applicable, accompanied by a

declaration or an affidavit of the attorney that represented the debtor during the course of

negotiating an agreement under this subsection, which states that--

(A) such agreement represents a fully informed and voluntary agreement by the

debtor;

(B) such agreement does not impose an undue hardship on the debtor or a dependent

of the debtor; and

(C) the attorney fully advised the debtor of the legal effect and consequences of--

(i) an agreement of the kind specified in this subsection; and

(ii) any default under such an agreement;

(4) the debtor has not rescinded such agreement at any time prior to discharge or

within sixty days after such agreement is filed with the court, whichever occurs later, by giving

notice of rescission to the holder of such claim;

As a result of USB Leasing’s response to his motion to compel, Mr. Anderson,

apparently experiencing a change of heart, filed a withdrawal of his motion, accompanied by a

motion to extend the time for him to complete a reaffirmation agreement with USB Leasing with

respect to his car lease.

I scheduled the debtor’s motion to compel, the debtor’s withdrawal of that motion and

his motion to extend the reaffirmation deadline for hearing to take the opportunity, as part of my

ruling on these matters, to articulate my understanding of the relationship between motions to

approve the assumption of car or other personal property leases under Bankruptcy Code § 365(p)

and reaffirmation agreements under § 524(c). I presented my rulings on the record at a hearing

on August 6, 2019, but promised to issue this written memorandum in order to elucidate my

analysis.

That analysis involves two inquiries. The first is whether lease assumption agreements

under Code § 365(p)(2) are subject to the requirements for debt reaffirmation set forth in Code §

524(c) or, put another way, whether reaffirmation is a prerequisite for lease assumption.

Assuming the answer is no, the second consideration is whether, upon execution of a lease

assumption agreement pursuant to § 365(p)(2), the debtor’s personal liability under the assumed

lease is subject to his bankruptcy discharge.

(5) the provisions of subsection (d) of this section have been complied with; and

(6)(A) in a case concerning an individual who was not represented by an attorney

during the course of negotiating an agreement under this subsection, the court approves such

agreement as—

(i) not imposing an undue hardship on the debtor or a dependent of the debtor; and

(ii) in the best interest of the debtor.

(B) Subparagraph (A) shall not apply to the extent that such debt is a consumer debt

secured by real property.

Bankruptcy Code § 524(c).

As to the first inquiry, my analysis begins as it must with the statutory text. Section

365(p) was added to the Bankruptcy Code as part of the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005 (“BAPCPA”) to fill a void in the existing law by providing a

vehicle for a debtor to assume leases of personal property not assumed by a chapter 7 trustee.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119

Stat. 23, § 309(b); see also In re Bailly, 522 B.R. 711, 713 (Bankr. M.D. Fla. 2014). As

suggested by the enacting legislation’s title, “Giving Debtors the Ability to Keep Leased

Personal Property by Assumption,” § 365(p) confers a benefit upon consumer debtors by

establishing a simple mechanism for debtors to retain leased personal property that often may be

of critical importance to them.

BAPCPA also amended Code § 362 to add a new subsection (h)(1)(A). Pub. L. No. 109-

8, 119 Stat. 23, § 305(1)(C). That subsection provides for the termination of the automatic stay

as to personal property of a debtor in certain instances, in the event the debtor fails to:

file timely any statement of intention required under section 521(a)(2) with respect

to such personal property or to indicate in such statement that the debtor will either

surrender such personal property or retain it and, if retaining such personal

property, either redeem such personal property pursuant to section 722, enter into

an agreement of the kind specified in section 524(c) applicable to the debt secured

by such personal property, or assume such unexpired lease pursuant to section

365(p) if the trustee does not do so, as applicable . . .

11 U.S.C. § 362(h)(1)(A) (emphasis added). The purpose of the enactment of § 362(h) was to

bring the automatic stay provisions in line with the new § 365(p). The important point for

purposes of the issues under consideration here is that the use of the either/or structure in the

statute makes it clear that reaffirmation and lease assumption are alternative, independent

procedures. In re Abdemur, 587 B.R. 167, 171 (Bankr. S.D. Fla. 2018). If lease assumption

required compliance with the reaffirmation procedures of Code § 524(c), then it would have been

unnecessary for Congress to amend § 362 to include the failure to assume a lease as a separate

ground for stay termination.

Furthermore, imposing a requirement of reaffirmation on lease assumption would add a

timing requirement to Code § 365(p)(2) that appears nowhere in the statute. See In re Ebbrecht,

451 B.R. 241, 247 (Bankr. E.D.N.Y. 2011). Reaffirmation agreements are effective only if

entered into prior to the entry of the debtor’s discharge. Bankruptcy Code § 524(c)(1). A

discharge in a run of the mill chapter 7 case will typically enter 60 days after the initial meeting

of creditors under Code § 341, which usually takes place about 40 days after the filing of the

bankruptcy petition commencing the case. Fed. R. Bankr. P. 4004(a); Fed. R. Bankr. P. 2003(a).

So in the vast majority of chapter 7 cases, a debtor receives a discharge between three and four

months from case commencement. Tying lease assumption to reaffirmation would mean a debtor

must complete both the lease assumption process and enter into a reaffirmation agreement within

100 days of filing his bankruptcy petition. Since a debtor has no control over how long a lessor

will take to respond to a notice under § 365(p)(2)(A) that the debtor wishes to assume a lease,

this can be a highly prejudicial limitation on the entire § 365(p)(2) scheme and a surprising one

indeed as the statute itself contains no time element whatsoever. See Ebbrecht, 451 B.R. at 247;

see also Laura B. Bartell, Making Assumptions About the Individual Debtor's Right to Assume

Under §$ 365(p)(2), 85 Am. Bankr. L.J. 265, 278-79 (2011). Unlike the lease assumption process,

the reaffirmation process provides for extensions of time when, for example, the creditor is

taking too long to complete the reaffirmation paperwork and a discharge order is looming. See

Fed. R. Bankr. P. 4004(c)(1)(J) and 4008(a).

The only time element remotely relevant to Code § 365(p)(2) appears in § 365(p)(1)

which restricts a chapter 7 debtor from even attempting to assume a personal property lease until

after a trustee rejects or fails to assume it on behalf of the estate. A chapter 7 trustee has a

minimum of 60 days from the entry of the order for relief to decide whether to assume or reject a

lease of personal property and may seek to extend that period. See Bankruptcy Code § 365(d)(1).

Assuming the trustee does not seek an extension beyond the statutory 60 days and the lease is

deemed rejected by the trustee’s inaction, this would leave the debtor a mere 40 days to achieve

lease assumption and reaffirmation. Adding injury to insult, should the trustee obtain, say, a 45

day extension of the statutory period, during which the debtor remains disabled from attempting

to assume the lease, while at the same time the debtor’s discharge enters, and then the trustee

rejects the lease, the debtor will effectively have been deprived of any opportunity whatsoever to

obtain the benefits of § 365(p)(2). See Bartell, supra at 279.

Further, if lease assumption requires reaffirmation and thus must occur pre-discharge, §

365(p)(2)(C), which offers lessors a safe-harbor from discharge violations while negotiating a

lease assumption, would be meaningless. Post-discharge, it would be too late for the parties to be

negotiating a lease assumption since reaffirmation is no longer possible. See Code § 524(c)(1). It

is a bedrock principle of statutory construction that a statute should not be interpreted in a

manner that renders any part of it ineffective. Corley v. U.S., 556 U.S. 303, 314 (2009) (citing

Hibbs v. Winn, 542 U.S. 88, 101 (2004) (quoting 2A N. Singer, Statutes and Statutory

Construction § 46.06, pp.181—186 (rev. 6th ed.2000)) (“[A] statute should be construed so that

effect is given to all its provisions, so that no part will be inoperative or superfluous, void or

insignificant ....”) (footnote omitted). Untethering lease assumption from reaffirmation so as to

permit lease assumption at any time, which is a more contextually accurate reading of §

365(p)(2), spontaneously gives meaning to § 365(p)(2)(C).

Additionally, requiring compliance with both § 524(c) and § 365(p)(2) before a personal

property lease can be assumed would render assumption for a chapter 7 debtor drastically

different from assumption for debtors or trustees in chapter 11 and chapter 13 cases. See Bartell,

supra, at 279. Congress chose to put the provision enabling chapter 7 debtors to assume leases of

personal property in § 365 of the Code. Section 365 contains 16 subsections and exponentially

more sub-subsections dealing with the assumption, rejection and assignment of leases and

executory contracts in all cases under the Code by trustees, debtors in possession and debtors.

Nowhere in § 365 is there a requirement that lease assumptions be accompanied by or constitute

debt reaffirmation. On the contrary, assumption under Code § 365 is generally understood to

create a post-petition obligation that is not subject to discharge. Ebbrecht, 451 B.R. at 247. A

debt not subject to discharge need not be reaffirmed. Jd. Unless Congress intended two different

definitions of “assume” within § 365, a statutory anathema, assumption under § 365(p)(2) cannot

require compliance with § 524(c). Bartell, supra, 279.

Finally, as noted above, the title of the section enacting § 365(p) in the BAPCPA

legislation was “Giving Debtors the Ability to Keep Leased Personal Property by Assumption.”

Bankruptcy Abuse Prevention and Consumer Protection Act, Pub. L. No. 109-8, 119 Stat. 23, §

309(b) (codified as amended at Bankruptcy Code § 365(p)). As the title suggests, the amendment

was enacted to facilitate the ability of debtors to retain leased property. Congress was conferring

a gift upon chapter 7 debtors. Reaffirmation, on the other hand, is no gift to debtors. Subsection

(c) of Code § 524, along with its companion subsection (d), drives home the unmistakable

message that the process of reaffirming an otherwise dischargeable debt is meant to be

complicated and off-putting for debtors. It reflects a clear policy bias in favor of discharging

debts that are dischargeable. Preparing reaffirmation agreements is time consuming and requires

great attention to detail. Lawyers who represent consumer debtors are happy to avoid the

process.? Interpreting § 365(p)(2) as an overlay upon § 524(c), thereby requiring both lease

assumption and reaffirmation, would completely undercut the purpose of § 365(p)(2). See

Bartell, supra, at 279.

As USB Leasing has pointed out, the only reported decision in this district dealing with

the interplay between § 365(p)(2) and § 524(c) is In re Creighton, 427 B.R. 24 (Bankr. D. Mass.

2007). Creighton involved motions to approve the assumption of two pre-petition motor vehicle

leases by a debtor. The court noted that Code §524(c) provides that debts arising under certain

post-petition agreements are not enforceable unless specified procedures are followed with

respect to those agreements, which is true for any “agreement between a holder of a claim and

the debtor, the consideration for which, in whole or in part, is based on a debt that is

dischargeable in a case under this title.” Jd. at 27 (quoting Code § 524(c)). As the leases in

question were entered into pre-petition and thus the liability thereunder was dischargeable, the

court observed that any subsequent agreement involving those leases would necessarily be based,

at least in part, on a dischargeable debt. The court thus concluded that assumption agreements

are a “species of reaffirmation agreement,” reasoning that a lease assumption is “an agreement to

be bound by a debt that arose prepetition, when the lease was originally entered into and

promises exchanged in consideration of each other, and that would otherwise and normally be

dischargeable.” Jd. at 28. Thus, the court ruled, § 365(p)(2) assumption agreements, when not

excepted from discharge by § 523(a), are agreements to which § 524(c) pertains. Id.

Creighton offers a thoughtful, creative and comprehensive analysis of the interplay

between §§ 365(p)(2) and 524(c). Nevertheless, while its conclusion that subjecting lease

3 Many consumer debtor attorneys are, to say the least, reluctant about certifying that a reaffirmation agreement does

not impose an undue hardship on a debtor. See Code § 524(c)(3)(B).

assumption agreements by individual chapter 7 debtors to the rigors and protections (and

disincentives) of debt reaffirmation may reflect laudable bankruptcy policy, I cannot square the

holding in Creighton with the requirements of the statutes as discussed above. Lease assumption

under § 365(p)(2) and reaffirmation under § 524(c) are independent procedures. To require a §

365(p)(2) lease assumption to conform to the strictures of § 524(c) reaffirmation would do

excessive violence to the statutory scheme, not to mention to the policies underlying the statutes.

The post-petition assumption of a pre-petition lease transforms the obligations under the assumed

lease into a post-petition obligation. Post-petition obligations are not subject to discharge and

thus, are not eligible for reaffirmation. See Bartell, supra at 281-82. That is why an estate

representative’s assumption of a pre-petition lease typically creates an administrative expense

claim in the event of subsequent default. See In re Michalek, 393 B.R. 642, 644 (Bankr. E.D.

Wis. 2008) (“[T]he bankruptcy code does not clearly indicate how damages for the breach of an

assumed lease are treated], |” but “a post-petition breach of an assumed lease may give rise to an

administrative claim under 11 U.S.C. § 503(b)(1)(A), which allows for payment of ‘the actual,

necessary costs and expenses of preserving the estate.’”). Code § 365(p)(2)(B) provides that

upon assumption, “the liability under the lease will be assumed by the debtor and not the estate.”

(emphasis added). This indicates that the liability becomes a post-petition obligation.

The decisions in Ebbrecht and Abdemur are instructive. In Ebbrecht, a chapter 7 debtor

indicated on his Statement of Intention that his vehicle lease from BMW would be assumed

pursuant to § 365(p)(2). Three months after the filing of the petition, BMW filed a reaffirmation

agreement the subject of which was the lease listed on the Statement of Intention. The court

denied approval of the reaffirmation agreement, holding it was not required in connection with

lease assumptions under § 365(p)(2). Ebbrecht, 451 B.R. at 248. The court identified a number

of key differences between § 524(c) and § 365(p)(2) which supported the conclusion that the two

sections are unrelated. First, while § 524 requires reaffirmation before discharge, lease

assumption under 365(p)(2) does not. Jd. at 247. Second, although substantial disclosures are

required for a reaffirmation agreement under § 524(c), § 365(p) does not require any disclosure.

Id. And third, the court must ultimately determine whether to accept a reaffirmation agreement

but need have no involvement in review or consideration of lease assumptions, which it

described as a “handshake” process. Id. The Ebbrecht court determined that the reaffirmation

and assumption provisions are not interchangeable and that “Congress clearly intended to

provide two separate provisions covering two very different situations, and adopted two very

different procedures.” Id.

The bankruptcy court in Abdemur applied similar reasoning in holding that post-

discharge in personam liability under an assumed lease is not dependent on adherence to the

reaffirmation provisions of Code § 524(c). In Abdemur, a chapter 7 debtor and Toyota entered

into an assumption agreement pursuant to which the debtor assumed a motor vehicle lease listed

on the debtor’s Statement of Intention. After realizing that he was unable to continue making

payments under the lease assumption agreement, but before his bankruptcy discharge entered,

the debtor returned the vehicle to Toyota. Toyota sought a ruling that the automatic stay did not

apply to its efforts to dispose of the car and to pursue the debtor for any remaining amounts due

under the lease. The debtor argued that he had no in personam liability under the lease because

he had not reaffirmed the lease in accordance with Code § 524(c) and, thus, the liability claim

under the lease would be discharged when he received his discharge. The court, following much

of the reasoning in Ebbrecht, disagreed with the debtor, holding that lease assumption had

10

nothing to do with reaffirmation. Abdemur, 587 B.R. at 172-73. The court also ruled that once

the lease was assumed, the debtor’s liability would survive discharge. Id.

Abdemur offers a neat segue into the second aspect of my inquiry. Having concluded that

the § 524(c) reaffirmation process has no place in a § 365(p) lease assumption, what affect does a

lease assumption have on a debtor’s discharge? The court in Abdemur concluded that lease

assumption under § 365(p), like lease assumption under § 365(a), creates a post-petition liability

that survives discharge and thus permitted the leasing company to pursue collection against the

debtor personally upon a post-assumption default. Id.

It is a fair point to note that lease assumption by an estate representative like a trustee

under § 365(a) requires court approval, while personal property lease assumption by a chapter 7

debtor under § 365(p)(2) appears to be an extra-judicial process. See Ebbrecht, 451 B.R. at 245.

This distinction could justify the conclusion that the former created a post-petition liability, while

the latter did not. The district court in Thompson v. Credit Union Fin. Grp., 453 B.R. 823 (W.D.

Mich. 2011), reached precisely this conclusion.

In Thompson, the chapter 7 debtor assumed a car lease shortly after filing bankruptcy but

soon thereafter concluded he could not afford to keep the car and surrendered it to the leasing

company. After his discharge entered and the case was closed, the leasing company notified the

debtor that it intended to collect the unpaid portion of the lease debt from him. The debtor moved

in the bankruptcy court to have the leasing company held in contempt for violating the discharge

injunction under Code § 524(a). The leasing company argued that by virtue of the lease

assumption under § 365(p), the debtor’s liability was not subject to the discharge.

The bankruptcy court, see In re Thompson, 440 B.R. 130 (Bankr. W.D. Mich. 2010),

rev'd and remanded sub nom. Thompson v. Credit Union Fin. Grp., 453 B.R. 823 (W.D. Mich.

1]

2011), applying reasoning similar to the court in Abdemur, ruled that the assumption by a chapter

7 debtor under § 365(p) was no different from assumption by a trustee under § 365(a), and that

each created a post-petition liability that was not subject to discharge. In re Thompson, 440 B.R.

at 132-33. On that basis, the court denied the debtor’s contempt motion. /d. at 133.

On appeal, the district court reversed. Thompson v. Credit Union Fin. Grp., 453 B.R. 823

(W.D. Mich. 2011). In its opinion, the court noted that before a chapter 7 debtor obtains the

opportunity to propose a lease assumption under § 365(p), the chapter 7 trustee must reject the

lease, either affirmatively or by inaction as provided for in § 365(d). Jd. at 826. The trustee’s

rejection, in turn, triggers the creation of a pre-petition liability for any claims by the lessor

arising from such rejection. Id.; see also Code § 365(g)(1). That liability is dischargeable.

Against this backdrop, the district court refused to consider the subsequent extra-judicial process

of a debtor’s entering into a lease assumption agreement with a lessor as anything more than an

agreement “suspending what would otherwise be the lessor’s right to retrieve the leased

property—a right expressly recognized by section 365(p)(1)—on mutually agreed terms, but

leaving unaffected the ultimate right of discharge triggered by the Trustee’s rejection of the lease

.... Thompson, 453 B.R. at 829. The district court also emphasized the difference between the

lease assumption processes under § 365(a) and § 365(p)—the former expressly requires court

approval while the latter does not. Id. at 828. The court refused to deprive debtors of their

discharge rights with respect to car lease debts, which the court considered an important aspect

of the Code’s fresh start policy, based on a private assumption agreement which, if subsequently

breached, “could unwittingly bind [debtors] to section 365(p) assumptions that leave them not

only without their leased car but also with all the liability they would have had absent the

bankruptcy filing.” Jd. at 829.

12

I believe it is possible to harmonize the approaches taken in Abdemur and by the district

court in Thompson. While § 365(p)(2) does not require court involvement in the lease

assumption process, it certainly does not prohibit it. USB Leasing had the right idea when it

attempted to condition its willingness to allow Mr. Anderson to assume the lease upon his

reaffirming the debt, it merely opted for the wrong procedure. Rather than imposing the burdens,

hurdles and time-constraints of reaffirmation, a lessor wishing to insure that an assumed lease

survives a lessee’s bankruptcy discharge need only insist upon a court order saying so. A debtor

could certainly choose to withdraw his offer to assume if he preferred to preserve his discharge

rights. But if both sides agreed, the matter could be presented to the court. Permitting the parties

to seek court approval of a lease assumption agreement on terms that are mutually acceptable to

them is the most efficient way to insure that the lease assumption process does what it is

intended to do—afford debtors a shot at retaining leased personal property.

What if, despite their best efforts, the parties cannot agree on the terms of a lease

assumption? What if Mr. Anderson, who was current on his car lease payments, had offered to

assume the lease and USB Leasing simply refused to go along? Recall that the § 365(p)(2)

process is voluntary and neither party may compel the other to enter into a lease assumption

agreement. Would Mr. Anderson be facing repossession of his car? I have heard leasing

companies argue that the failure of a debtor to consummate a lease assumption triggers the

operation of Code § 521(d), the provision which reinstates the enforceability of so-called ipso

facto clauses in leases. These are clauses found in many contracts that make bankruptcy or

insolvency an automatic event of default. Bankruptcy Code § 365(e)(1) renders ipso facto

clauses in leases generally unenforceable once bankruptcy ensues. But Code § 521(d) taketh

away what § 365(e)(1) giveth if a debtor either (a) fails to timely redeem or reaffirm as to a debt

13

secured by a purchase money security interest in personal property or (b) fails to timely take the

action specified in Code § 362(h)(1) and (2) as to leases of personal property. In either of these

circumstances, the ipso facto clause springs back to life.*

Is a debtor justified in the fear that the failure to successfully consummate a Code §

365(p)(2) lease assumption will bring a 3:00 a.m. visit from the repo man? With respect to

purchase money security interests in vehicles owned outright by debtors, it appears to be settled

that under Massachusetts law a secured party is prohibited from self-help repossession unless the

debtor is in payment default or the vehicle’s value has been substantially impaired. Mass. Gen.

Laws. ch. 255B § 20B(a). But with respect to car leases, there is some uncertainty as to whether

state law similarly protects debtor lessees.°

I will leave this issue unresolved for the moment because it is not necessary to invoke

state law based on the facts here. All Code § 521(d) requires in order to avoid resurrecting the

ipso facto clause in personal property leases is for the debtor to timely take the actions required

+ By using the either/or structure, § 521(d), just like § 362(h)(1)(A) discussed above, lends further support to the

notion that reaffirmation and lease assumption are alternative, not cumulative, procedures.

5 The issue is whether a car lease constitutes a retail installment contract within the meaning of the state statute. A

non-precedential decision in Marine Midland Bank NA v. Moran, 1994 Mass. App. Div. 167 (1994) held that the car

lease in that case did not qualify as a retail installment contract under Mass. Gen. Laws ch. 255B, § 1. See also,

Aguiar v. Santander Consumer USA Inc., No. CV 17-11349-GAO, 2018 WL 4119684, at *2 (D. Mass. Aug. 29,

2018).

14

in § 362(h)(1)° and (2). Here, Mr. Anderson did precisely what he was required to do under §

362(h)(1).’

Mr. Anderson’s bankruptcy case was initiated on April 12, 2019. His Official Form 108

Statement of Intention was due to be filed by May 13, 2019. (Order to Update ECF #4). He filed

it on May 1, 2019, listing his lease with USB Leasing and stating his intention to assume that

lease under § 365(p)(2). He notified the lessor of his desire to assume the lease by letter dated

May 15, 2019. This was all that was required to avoid the draconian consequences of § 521(d).

There is no requirement in either § 521(d) or § 362(h) that the lease assumption be

consummated. All that is required is that the debtor do his part. A lessor who refuses to go along

with a § 365(p)(2) lease assumption cannot be compelled to do so, but neither will it receive the

gift of an enforceable ipso facto lease clause. Thus, as long as Mr. Anderson remains current on

his car lease payments and any other obligations under his lease, USB Leasing may not default

him and attempt to take his car for having filed a bankruptcy petition.

So to summarize, the appropriate method for a personal property lease to survive the

chapter 7 bankruptcy filing and discharge of the debtor-lessee where the trustee fails to assume

the lease is for the debtor to include the lease obligation on his Official Form 108 Statement of

Intention and to check the box “yes” under the heading “will the lease be assumed” and then for

® Code § 362(h)(1) provides that the automatic stay “is terminated with respect to personal property of the estate or

of the debtor securing in whole or in part a claim, or subject to an unexpired lease, . . if the debtor fails within the

applicable time set by section 521(a)(2)—(A) to file timely any statement of intention required under section

521(a)(2) with respect to such personal property or to indicate in such statement that the debtor will either surrender

such personal property or retain it and, if retaining such personal property, either redeem such personal property

pursuant to section 722, enter into an agreement of the kind specified in section 524(c) applicable to the debt secured

by such personal property, or assume such unexpired lease pursuant to section 365(p) if the trustee does not do so, as

applicable; and (B) to take timely the action specified in such statement, as it may be amended before expiration of

the period for taking action, unless such statement specifies the debtor’s intention to reaffirm such debt on the

original contract terms and the creditor refuses to agree to the reaffirmation on such terms.” 11 U.S.C.§

362(h)(1)(A) and (B).

7 Code § 362(h)(2) does not apply to this case.

15

the debtor to invoke the procedures set forth in Code § 365(p)(2) and, if an agreement is reached,

seek court approval of the lease assumption which may include a request for a determination that

the assumed lease is a post-petition obligation of the debtor. A reaffirmation agreement in such

situations is inappropriate and will not be accepted. Should a lessor refuse to enter into a §

365(p)(2) lease assumption, the court will not compel the lessor to do so, however, the failure to

complete the lease assumption process under such circumstances will not revive an otherwise

unenforceable ipso facto provision of the lease.

As aresult of the foregoing, at the hearing on August 6, 2019, Mr. Anderson’s

withdrawal of his motion to compel USB Leasing to enter into a lease assumption agreement was

accepted (I would have denied the motion anyway as the lease assumption process is entirely

voluntary). His motion to extend the time to complete the reaffirmation process with USB

Leasing was denied as unnecessary since reaffirmation of an assumed lease is inappropriate.

Finally, I granted the parties leave to file a joint motion to approve a lease assumption agreement

16

pursuant to Bankruptcy Code § 365(p)(2) should they, in light of my rulings, reach such an

agreement.

Entered at Boston, Massachusetts this 4th day of September, 2019.

By the Court,

Melvin. S. Hoffman

United States Bankruptcy Judge

Counsel Appearing: Gary W. Cruickshank, Esq.

Boston, MA

for Kevin Anderson

Joseph M. Dolben, Esq.

Warwick, RI

for USB Leasing LT

17