Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-02380/USCOURTS-casd-3_17-cv-02380-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (District or BAP)

---

1

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MELISSA CARIN MATHER BOBKA,

Debtor-Appellant,

v.

TOYOTA MOTOR CREDIT 

CORPORATION,

Appellee.

Case No.: 17cv2380-GPC-AGS

ORDER AFFIRMING 

BANKRUPTCY COURT ORDER

This case presents an issue of first impression in the Southern District of California 

and the Ninth Circuit, that is, does a lease assumption agreement under 11 U.S.C. § 

365(p) remain enforceable following discharge even if the lease assumption was not 

reaffirmed under 11 U.S.C. § 524(c)? District and bankruptcy courts outside the Ninth 

Circuit that have confronted the question all agree that the interplay between these 

statutes is confusing but disagree on the answer to the question. The Court concludes that 

reaffirmation under Section 524(c) is not required where a debtor has properly assumed a 

lease under Section 365(p)(2). 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 1 of 29
2

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

This is a bankruptcy appeal brought by Debtor-Appellant Melissa Carin Mather 

Bobka (“Mather”)1against Appellee Toyota Motor Credit Corporation. In this appeal, 

the Court reviews the Memorandum Decision of Chief Judge Laura S. Taylor of the 

United States Bankruptcy Court for the Southern District of California which found: (1) 

that Toyota’s collection actions did not violate the automatic stay since any such actions 

took place after Mather’s bankruptcy had been discharged; (2) that reaffirmation under 

Section 524(c) is not required when a lease is assumed under Section 365(p)(2); and (3) 

that––due to waiver by Toyota regarding written notification and a 30-day timing 

requirement–– Mather did actually assume the Lease when she executed the Lease 

Assumption Agreement. AR2 249, 253. 

I. APPELLATE JURISDICTION AND STANDARD OF REVIEW

The district court has jurisdiction to hear this bankruptcy appeal pursuant to 28 

U.S.C. § 158(a)(1). 

On appeal, the district court reviews the bankruptcy court’s findings of fact for clear 

error and reviews its conclusions of law de novo. In re Int’l Fibercom, 503 F.3d 933, 940 

(9th Cir. 2007). Whether the bankruptcy court applied the correct legal standard is a legal 

issue which is reviewed de novo. In re Karelin, 109 B.R. 943, 946 (B.A.P. 9th Cir. 1990). 

II. BACKGROUND3

On August 31, 2016, Mather filed a voluntary Chapter 7 bankruptcy petition. AR

10, 16. She was represented by the Doan Law Firm throughout her bankruptcy 

 

1 The Court observes that Appellants’ brief refers to Melissa Carin Mather Bobka as “Mather” and will 

accordingly adopt this shorthand. 

2 AR refers to the Appellate Record in this case. 

3 The facts as stated are largely taken from the Memorandum Decision of the Bankruptcy Judge. The 

parties do not dispute these facts except for one immaterial factual issue. See Dkt. No. 15 at 2. Mather 

asserts that the Court erred in stating that the Statement of Intention filed with the bankruptcy petition 

was served on Toyota. The Court agrees with Toyota that this is not a material fact because the 

bankruptcy court’s decision regarding written notification was not based on this fact. See AR 269. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 2 of 29
3

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

proceedings and in this instant appeal. In her bankruptcy schedules, Mather stated an 

intention to reaffirm a 2014 Toyota RAV4 (“Vehicle”) as a secured debt. AR 250. Her 

schedules erroneously described Toyota as a lender with a claim secured by a lien against 

the vehicle, when in actuality Toyota was the lessor of the Vehicle. As such, Mather

should have completed part 2 of the Statement of Intention which requires specificity as 

to her intention to assume the lease of the Vehicle. Id.

Pursuant to Section 365(d)(1), Ms. Mather’s chapter 7 trustee had the right to 

assume the Lease during the first 60 days of the bankruptcy case, but did not do so. Id. 

As of October 31, 2016, the Vehicle was not an asset of the estate and the automatic stay 

as to the vehicle was terminated pursuant to Section 365(p)(1). Section 365(p)(2) 

provides that where a trustee fails to timely assume a lease, a debtor has the right to 

attempt assumption by advising her lessor “in writing” of her desire to assume the lease. 

11 U.S.C. § 365(p)(2). 

Mather did not send any “writing” to Toyota. However, on September 8, 2016, she 

called Toyota and requested that she be allowed to continue payments to retain the 

vehicle. AR 251. Toyota’s agent, National Bankruptcy Services LLC (“NBS”) advised 

Mather that she needed to assume the lease to retain the vehicle. On September 16, 2016, 

the NBS prepared an assumption agreement and sent it to Mather’s attorney at the Doan 

Law Firm. Mather, who was traveling and attempting a marital reconciliation, did not 

immediately execute the Lease Assumption Agreement until December 5, 2016. AR 252

Despite the fact that this may have been untimely under § 365(p)(2)(B), Toyota accepted 

her request for assumption and acknowledged receipt of the executed document on 

December 6, 2016. Id. 

Mather received her discharge on December 6, 2016, and her case closed on 

December 12, 2016. Id. While Mather was not in default on the lease when she entered 

bankruptcy and made payments during the bankruptcy proceedings, in November 2016 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 3 of 29
4

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

she stopped lease payments despite the execution of the Lease Assumption Agreement in 

December. Toyota does not dispute that it engaged in collection activity between 

December 20, 2016 through approximately February 25, 2017. Id. The bankruptcy judge 

observed that Mather provided hearsay testimony that Toyota had called her parent’s 

home while she was traveling prior to her discharge, but that there was no record of any 

such calls, and particularly that there was no evidence that they related to collection 

attempts. 

On January 2, 2017, Debtor surrendered the vehicle. Id. Mather advised Toyota 

that her bankruptcy precluded collection attempts and that her assumption of the Lease 

was ineffective as it was not coupled with reaffirmation. On February 25, 2017, Plaintiff, 

through the Doan Law Firm, requested an Order to Show Cause re: Violation of the 

Automatic Stay and Violation of the Plan Discharge. AR 253. In that request, Mather 

alleged significant emotional distress and requested over $50,000 in compensatory and 

punitive damages, remedial or coercive sanctions as appropriate, and attorneys’ fees. The 

Bankruptcy Court issued the OSC, which was followed by several rounds of briefing and 

two hearings. Id. 

On November 16, 2017, the bankruptcy court issued its Memorandum Decision. 

On November 27, 2017, Mather filed her Notice of Appeal from the bankruptcy court, 

and elected to have its appeal heard by the United States District Court for the Southern 

District of California instead of the Ninth Circuit’s Bankruptcy Appellate Panel. Dkt. 

No. 1 at 2. Appellant filed their Opening Brief on February 1, 2018. Dkt. No. 9. 

Appellee filed it Responsive Brief on March 12, 2018. Dkt. No. 15. Appellant filed a 

Reply on March 26, 2018. Dkt. No. 16. 

III. DISCUSSION

The instant bankruptcy appeal addresses three issues: (1) whether Appellant waived 

a challenge to the bankruptcy judge’s order that Toyota did not violate the automatic stay; 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 4 of 29
5

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(2) whether a Section 365(p) lease assumption must always be coupled with a judicially 

approved Section 524(c) reaffirmation for personal liability to attach post-discharge; and 

(3) whether Mather actually assumed the lease. 

A. Waiver of any Argument Challenging that Toyota Did Not Violate the 

Automatic Stay

Chief Judge Taylor found that Toyota did not violate the automatic stay as the 

automatic stay had already terminated by the time Toyota commenced collection activities. 

AR 254. The bankruptcy court found that there was limited hearsay evidence that Toyota 

may have made calls to Mather between November 9, 2016 and December 12, 2016, but 

that this evidence was not conclusive and that the calls could have been unrelated to 

collection activities, such as for Mather’s pending Lease assumption or the recovery of the 

Vehicle. Id. Next, the court found that Toyota’s transmission to Mather of a lease 

assumption agreement was not a stay violation because it was requested from the debtor 

and because it had been transmitted only to the Doan Law Firm and not Mather directly. 

AR 255. 

Appellees contend as a threshold matter that Mather has waived any claim that 

Toyota violated the automatic stay by failing to challenge this issue on appeal. The Court 

agrees. Appellant did not raise this issue in her Opening or Reply Briefs. See Dkt. Nos. 9, 

16. Moreover, Appellant solely framed the “Issue Presented” in this case as “[d]oes 11 

USC 365(p) override the discharge protections of 11 USC 524?” Dkt. No. 9 at 1. 

Accordingly, the Court finds that to the extent Appellant sought to challenge the 

bankruptcy court’s finding that Toyota did not violate the automatic stay, Appellant has 

waived that argument. See In re Meehan, 659 F. App'x 437, 438 (9th Cir. 2016) (citing 

Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[O]n appeal, arguments not raised 

by a party in its opening brief are deemed waived.”)). 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 5 of 29
6

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

B. Section 365(p) Lease Assumption and Section 524 Reaffirmation

1. Section 365(p)

The Bankruptcy Abuse Prevention and Consumer Act (“BAPCPA”) of 2005 was 

enacted in October 2005 and added a new subsection (p) allowing the debtor––rather than 

a trustee––to assume a lease. See 11 U.S.C. § 365(p). Prior to the enactment of the Act, 

the power to assume a lease in a Chapter 7 case was given only to the trustee. See 11 

U.S.C. § 365(a) (“[T]he trustee, subject to the court’s approval, may assume or reject any 

executory contract or unexpired lease of the debtor.”). If the trustee did not exercise the 

right of assumption as to a particular lease, a chapter 7 debtor was free to enter into a 

reaffirmation agreement as to his or her obligations under the lease (with lessor 

approval), but “assumption” was not an option for the chapter 7 debtor. See In re 

Creighton, 427 B.R. 24, 25 (Bankr. D. Mass. 2007). 

Post-BAPCPA, even if a lease is rejected or deemed rejected by a trustee’s nonaction, a debtor may assume a lease under 11 U.S.C. § 365(p). Section 365(p) 

specifically addresses the assumption of a personal property lease by a debtor. It provides 

as follows:

(1) If a lease of personal property is rejected or not timely assumed by the 

trustee under subsection (d), the leased property is no longer property of the 

estate and the stay under section 362(a) is automatically terminated.

(2)(A) If the debtor in a case under chapter 7 is an individual, the debtor may 

notify the creditor in writing that the debtor desires to assume the lease. 

Upon 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.

(B) If, 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.

(C) The stay under section 362 and the injunction under section 524(a)(2) 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 6 of 29
7

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

shall not be violated by notification of the debtor and negotiation of cure 

under this subsection.

A lease assumption under Section 365(p) proceeds in several steps:

[T]he debtor offers to assume the lease obligation, and the lessor decides 

whether to accept the debtor's offer . . . . If the lessor determines that it is 

willing to allow the debtor to assume the lease, it will then notify the debtor 

of this decision, and may condition such assumption on cure of any 

outstanding defaults on terms set by the contract, however, the lessor is not 

under any obligation to accept the debtor's offer. Upon being notified of 

intent to assume an unexpired lease under 11 U.S.C. § 365(p)(2)(A), the 

lessor is granted safe harbor to contact the debtor with an acceptance and if 

necessary, negotiate a cure without violating the automatic stay or the 

discharge injunction. . . .If the parties come to an agreement, the third and 

final step required by the statute is that a writing between the lessor and the 

debtor be signed to memorialize the terms of the lease assumption.

Williams v. Ford Motor Credit Co., LLC, No. 15-CV-14201, 2016 WL 2731191, at *3 

(E.D. Mich. May 11, 2016) (citing In re Perlman, 468 B.R. 437, 439 (Bankr. S.D. Fla. 

2012) (quotations and citations omitted)). Section 365(p) does not require a bankruptcy 

court to review or approve a lease assumption agreement. See In re Ebbrecht, 451 B.R. 

241, 245 (Bankr. E.D.N.Y. 2011) (“Neither judicial review nor approval of the lease 

assumption agreement is required by the Bankruptcy Code or Rules.”). A lease assumed 

by the chapter 7 debtor becomes a liability of the debtor, and not a liability of the estate. 

See id. (citing 11 U.S.C. § 365(p)(2)(B)). 

2. Section 524(c)

Section 524(c) provides a general framework under which a debtor may agree to 

remain personally liable for a debt obligation following entry of discharge. Under the 

Section, the following is required:

(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 –

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 7 of 29
8

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

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

(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...

(4) the debtor has not rescinded such agreement...[and]

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

with.

11 U.S.C. § 524(c). Reaffirmation agreements are “contrary to the stated goal of a debtor 

receiving a fresh start” and thus are “subject to intense judicial scrutiny and must comply 

with all statutory requirements.” Ebbrecht, 451 B.R. at 243-44. Among these 

requirements are inter alia that the reaffirmation agreements must contain disclosures 

contained in Section 524(k), that a debtor may rescind the reaffirmation agreement during 

a cooling-off period, that the agreement must be filed with the Court accompanied by an 

attorney’s declaration or affidavit stating the agreement represents a fully informed and 

voluntary agreement by the debtor, and that reaffirmation agreements must be approved 

by the bankruptcy court. See Williams, 2016 WL 2731191, at *4. 

3. Section 365(p) and Section 524(c)

The primary question in this appeal is whether the bankruptcy court erred by 

concluding that a lease assumption agreement under Section 365(p) remains enforceable 

following discharge even if the lease assumption agreement was not reaffirmed under 

Section 524(c). Bankruptcy and district courts around the country have struggled with this 

question, in part because Section 365(p) is “not a model of clarity.” In re Garaux, 2012 

WL 5193779, at *2 (Bankr. N.D. Ohio, Oct. 19, 2012). Bankruptcy treatises have noted 

the split on the issue. See § 11:18. Enforcement of the discharge—Reaffirmation of the 

discharged debt, 1 Bankruptcy Law Fundamentals § 11:18 (“Until Congress or a binding 

appellate court resolves the conflict, the debtor/lessee and the creditor/lessor must follow 

the view of the local bankruptcy court.”). This difficulty is confounded by the fact that the 

“legislative history of BAPCPA does not address new subsection(p) specifically.” 

Thompson v. Credit Union Financial Group, 453 B.R. 823, 827 (W.D. Mich. 2011). 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 8 of 29
9

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Chief Judge Taylor held that the “better reading” that was consistent with canons of 

statutory construction, is that a debt under a lease assumption agreement under Section 

365(p)(2) need not be separately reaffirmed under Section 524(c). AR 257. In reaching 

this conclusion, the bankruptcy court began by finding that a plain language analysis of the 

statutes was inconclusive.4 Accordingly, Chief Judge Taylor applied canons of statutory 

interpretation and found inter alia that: (1) the specific provisions of Section 365 arguably 

controlled over the general provisions of Section 524; (2) the statutory scheme of the 

Bankruptcy Code as a whole supported that reaffirmation was not required for the lease 

assumption to survive discharge; (3) close judicial supervision is not required of all 

reaffirmation decisions, suggesting that Congress would allow personal property lease 

assumptions without judicial supervision; (4) Congress did not require reaffirmation 

disclosures relevant to consumer personal property leases when it amended reaffirmation 

disclosure provisions in the BAPCPA; (5) Section 362(h)(1)’s use of disjunctive phrasing 

such as “either” and “or” indicates that 524(c) reaffirmation and 365(p) lease assumption 

are independent actions; (6) Pre-BAPCPA understanding of the meaning and consequences 

of lease assumption lends support that Congress intended that assumption created a postpetition obligation; (7) the absence of Court approval of Section 365(p)(2) did not compel 

a different conclusion; and (8) a statute should not be interpreted to render it nonsensical 

or superfluous. 

The Court begins its analysis by reviewing the two competing judicial views on 

this issue. Several courts across the country have concluded that reaffirmation is required 

under Section 524(c) in order for a lease assumption to survive discharge. These courts 

 

4 As Chief Judge Taylor explained, nothing in Section 365(p) or Section 524 expressly limits 

assumption––meaning that it becomes a post-petition personal obligation––with conditions that it be 

affirmed by the court through the reaffirmation process. Nonetheless, Section 524, entitled “Effect of 

Discharge,” states that an agreement in relation to dischargeable debt is enforceable only if it complies 

with the discharge provisions in the statute. AR 257.

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 9 of 29
10

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

have emphasized the Bankruptcy Code’s policy rationale favoring debtor protection and 

providing debtors with a “fresh start.” See Thompson, 453 B.R. at 828.5 By entering into 

lease assumption agreements under Section 365(p) that “fresh start” is compromised by 

the release of consequential rights, protections, and benefits. See In re Garaux, 2012 WL 

5193779, at *4. These courts emphasize that this “fresh start” should not be relinquished 

without judicial oversight through the reaffirmation process. Thompson, 453 B.R. at 828 

(“It would be inconsistent for a Chapter 7 debtor to be able to bypass judicial approval of 

an assumption while such approval is required in the contexts of other types of 

bankruptcies.”). See also In re Creighton, 427 B.R. at 30 (emphasizing the consumer 

protection purpose of the BAPCPA). Furthermore, some courts have found that the plain 

language of Section 365(p) supports requiring Section 524(c) reaffirmation. “Section 

365(p)(2) uses the language of assumption, but the assumption is not self-executing . . . . 

Rather, [Section] 365(p) says that, after certain conditions are satisfied, the liability under 

the lease will be assumed, suggesting that more is needed for assumption of liability.” 

Thompson, 453 B.R. at 827-28. The “more is needed” indicated to the Thompson Court 

that compliance with the Section 524(c) reaffirmation procedures was also required. Id. 

Indeed, these courts have emphasized that Section 524(c) applies because lease 

assumption agreements entered under Section 365(p)(2) are a species of reaffirmation 

agreement. In re Creighton, 427 B.R. at 28. 

Another line of cases holds that reaffirmation is not required in order for a lease 

assumption agreement to be enforced post-discharge. These cases emphasize that Section 

365(p) does not explicitly require reaffirmation under Section 524(c) and that Congress 

would have so stated if that had been its intention. See, e.g., In re Ebbrecht, 451 B.R. at 

247 (“[H]ad Congress intended for leases to be both assumed under Section 365(p) and 

 

5

In Thompson v. Credit Union Financial Group, 453 B.R. 823 (W.D. Mich. 2011), the district court 

reversed the bankruptcy judge’s conclusion that reaffirmation was not required for a lease assumption 

agreement to be enforceable post-discharge. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 10 of

 29
11

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

reaffirmed under Section 52, it would have said so, but again, has not.”); In re Bailly, 522 

B.R. 711, 716 (Bankr. M.D. Fla. 2014) (“Congress easily could have referenced § 524(c) 

if it desired debtors to follow that procedure in addition to the lease assumption 

procedure.”). Moreover, these courts reason that Section 365(p)(2) would be rendered 

superfluous if 524(c) reaffirmation was required. See In re Bailly, 522 B.R. at 715 (“Why 

create § 365(p)(2) at all if Congress intended to require a separate reaffirmation agreements 

to assume a lease? Why not just require the debtor to reaffirm a lease after the Chapter 7 

trustee does not timely assume it?”). Further, they emphasize that anomalous results could 

result by imposing a Section 524 reaffirmation requirement, including that:

[A]ssumption of a lease under Section 365(p) binds the debtor to the lease 

terms and the discharge has no effect on the debtor's assumed obligation. 

Under the logic of [requiring reaffirmation], a lessor would have no ability 

to enforce a lease agreement assumed by the debtor in the event of a 

subsequent default. This interpretation would render section 365(p) a nullity 

and would create an absurd result.

In re Mortensen, 444 B.R. 225, 230 (Bankr. E.D.N.Y. 2011). See also In re Bailly, 522 

B.R. at 716 (“[i]f reaffirmation agreements must accompany lease assumptions, a lessor 

could face the unenviable position of being bound by a lease assumption––which does not 

require judicial approval––but having its reaffirmation agreement denied by the court.”). 

Statutory construction requires that “when the statute’s language is plain, the sole 

function of the courts––at least where the disposition required by the text is not absurd––

is to enforce it according to its terms.” See In re Perlman, 468 B.R. at 441 (quoting 

Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004)). The Court finds that a plain language 

analysis does not provide a definitive answer on this issue. Toyota argues that the plain 

language of 365(p)(2) authorizes consumer debtors to assume personal property leases 

and couples that assumption with debtors’ liability. See 11 U.S.C. § 365(p)(2)(B) 

(dictating the “liability under the lease will be assumed by the debtor and not by the 

estate.”). According to Toyota that plain language shows congressional intent that 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 11 of

 29
12

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

assumption of liability survives discharge. On the other hand, some courts have 

emphasized that Section 365(p) states that “liability under the lease will be assumed,” 

indicating a further step that necessarily must take place via Section 524(c) reaffirmation. 

See Thompson, 453 B.R. at 828. 

That Courts on both sides of this issue have found plain language to support their 

respective conclusions is revelatory of the fact that plain language alone cannot resolve this 

dispute. Compare Thompson, 453 B.R. at 828, 829 (“[Section] 365(p) says that, after 

certain conditions are satisfied, the liability under the lease will be assumed, suggesting 

that more is needed for assumption of liability.”) (internal quotations omitted); In re 

Creighton, 427 B.R. at 248 with Williams v. Ford Motor Credit Co., LLC, No. 15-CV14201, 2016 WL 2731191, at *6 (E.D. Mich. May 11, 2016) (“Section 365(p) specifically 

addresses lease assumption agreements and does not expressly require that the underlying 

debt be reaffirmed under Section 524(c). Requiring such reaffirmation would be adding a 

step that Congress chose not to include . . .”); In re Perlman, 468 B.R. at 441 (“If Congress 

had intended the reaffirmation agreement and lease assumption provisions to be 

interconnected or interchangeable, it would not have made the two procedures so different 

and incompatible.”). Accordingly, the Court looks to statutory interpretation principles 

and relevant case law to resolve the dispute. 

C. Reasons to Not Require Section 524(c) Reaffirmation

1. 365(p) is Rendered Superfluous

Chief Judge Taylor concluded that “[a] statute should not be interpreted so as to 

render it superfluous or nonsensical; [Mather’s] ride through arguments results in both.” 

In reaching this conclusion, the bankruptcy court relied on statutory interpretation canons 

of construction such that statutes should be construed to give effect to “all its provisions, 

so that no part will be inoperative or superfluous, void or insignificant.” Corey v. United 

States, 556 U.S. 303, 314 (2009). In In re Mortensen, the bankruptcy judge distinguished 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 12 of

 29
13

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Eader and Creighton––which required reaffirmation––on the basis that these cases failed 

to recognize that a Section 365(p) lease assumption binds the debtor to the lease terms and 

that the discharge has no effect on the debtor’s assumed obligation. 444 B.R. at 230. 

“Under the logic of Eader, a lessor would have no ability to enforce a lease agreement 

assumed by the debtor in the event of a subsequent default” rendering section 365(p) a 

“nullity” because “[c]ongress could not have intended to give the debtor the right to assume 

a lease, but not be bound by its terms upon assumption.” Id. 

There would be no purpose to Section 365(p) if a reaffirmation agreement was 

required. As the Court in Bailly stated:

Why create § 365(p)(2) at all if Congress intended to require a separate 

reaffirmation agreements [sic] to assume a lease? Why not just require the 

debtor to reaffirm a lease after the Chapter 7 trustee does not timely assume 

it? 'A statute should be construed to give effect to all its provisions, so that 

no part will be inoperative or superfluous, void or insignificant.' [Corley v. 

United States, 556 U.S. 303, 304 (2009)]. Distinguishing between lease 

assumption and reaffirming a debt allows debtors to do exactly what § 

365(p)(2) allows – to decide whether or not to assume the lease, thus 

initiating the back-and-forth negotiating process. Requiring compliance with 

reaffirmation procedures renders Congress's choice to add § 365(p)(2) 

effectively meaningless – a debtor simply could submit a reaffirmation 

agreement and forego the § 365(p)(2) process entirely.

Bailly, 522 B.R. at 716. The Court agrees with this reasoning. If Congress intended to 

require reaffirmation, there is no reason Congress set forth an extensive 365(p) process for 

lease assumptions if it could have just explicitly made lease assumptions part of the 

reaffirmation process. This rationale weighs strongly against a rule requiring reaffirmation. 

2. Anomalous Result

Next, several aspects of requiring reaffirmation produce an anomalous result when 

viewed with the full context of Section 365(p). As stated above, the court in Mortensen 

found that requiring reaffirmation would create an absurd result. 444 B.R. at 230

(“[A]ssumption of a lease under Section 365(p) binds the debtor to the lease terms and the 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 13 of

 29
14

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

discharge has no effect on the debtor's assumed obligation. Under the logic of [requiring 

reaffirmation], a lessor would have no ability to enforce a lease agreement assumed by the 

debtor in the event of a subsequent default. This interpretation would render section 365(p) 

a nullity and would create an absurd result.”). Further, requiring reaffirmation leads to an 

anomalous result in that a lessor could wind up being bound by a lease assumption––

through 365(p) which does not require judicial approval––but the reaffirmation––which 

does require judicial approval––could be denied by the court. See Bailly, 522 B.R. at 716. 

The bankruptcy judge bolstered this argument by reference to the difference in 

economics between a true lease and a secured transaction. AR 264, pg. 18.6 A secured 

creditor has a lien on the debtor’s property and may secure repayment of the loan with a 

lien on the asset––a consumer who buys a car owns the car subject to a lien securing 

repayment of the car loan, and thus the lender retains an in rem right to recover payment. 

In contrast, a lessor agrees to make an asset available for possession and use in exchange 

for periodic payments. See 12 C.F.R. § 213.2(e)(1)-(2). The economic value of, for 

example, a leased car is “calculated based on its ability to generate a stream of income in 

exchange for use and, typically, the declining value of the car through normal use.” 

Consequently, giving the car back to the lessor does not equate into compensation for 

missed rental income. AR 264, pg. 18. The bankruptcy judge reasoned that:

Once the economics of a vehicle lease are considered squarely, it is clear 

that an assumption that does not create personal liability for ongoing lease 

payments gives the lessor nothing; the lessor does not get realizable 

compensation for a debtor’s use of the leased vehicle or for the decline in 

vehicle value while a debtor uses the car. The argument renders § 365(p)(2) 

nonsensical. 

This reasoning is persuasive. Section 365(p) is meant to allow the lessee to retain 

assumption of the leased asset. To do so, the lessor necessarily must retain a right to go 

 

6 After the record on appeal was filed in the District Court, Toyota noticed the record was missing two 

pages (pages 17 and 18). The Bankruptcy Court subsequently corrected the record, but did not 

renumber the record. The Court will refer to these pages as AR 264, pg. 17 and 18. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 14 of

 29
15

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

after the lessee in personal liability, otherwise there would be no incentive to enter into a 

365(p) assumption with the lessee. This sentiment was echoed by the Court in In re Garaux

which ultimately held that reaffirmation was required, but wisely observed that its ruling 

would “render much of § 365(p) meaningless” because “it is unlikely that creditors will 

accept a lease assumption that does not revive a debtor’s liability, the requirements of 

Section 524(c) will supplant those of § 365(p).” 2012 WL 5193779, *4. 

The bankruptcy judge also raised another timing issue. Reaffirmation must take 

place before a discharge pursuant to Section 524(c)(1). In contrast, Section 365(p)(2) is 

not so limited and the negotiation of a Section 365(p)(2) assumption can take place after a 

discharge. See 11 U.S.C. § 365(p)(2)(C) (“The stay under section 362 and the injunction 

under section 524(a)(2) shall not be violated by notification of the debtor and negotiation 

of cure under this subsection.”). As such, the court’s reasoning––“If successful 

reaffirmation must precede discharge, it makes no sense to allow negotiation of a § 

365(p)(2) assumption after discharge if it is valid only if coupled with a reaffirmation that 

is an impossibility”––is persuasive and shows a further nonsensical result that results from 

requiring reaffirmation. AR 265. 

These absurdities and anomalous results weigh strongly in favor of a rule that does 

not require reaffirmation to go hand-in-hand with the Section 365(p) lease assumption. 

3. Section 362(h)’s Use of the Disjunctive

The bankruptcy court also referred to Sections 362(h) and 521(a)(6)7to support its 

rule to not require reaffirmation. Section 362(h)(1) provides:

In a case in which the debtor is an individual, the stay provided by 

subsection (a) 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 

 

7 The bankruptcy court cited to Section 521(a)(6) in its heading, but later referred to Section 521 to 

discuss the use of the disjunctive regarding the the failure to comply with a secured loan “or” lease 

obligation. This citation is minimally persuasive, when Section 362(h)(1)’s use of the disjunctive 

directly addresses the reaffirmation and assumption processes at issue in this instant case. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 15 of

 29
16

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

lease, and such personal property shall no longer be property of the estate 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) (emphasis added). According to Chief Judge Taylor, the “either” 

before the options to retain the property and the “or” between the description of 524(c) 

reaffirmation and Section 365(p) assumption provides a clear indication that reaffirmation 

and assumption are independent actions. To support this analysis, the bankruptcy court

cited to In re Dumont, 581 F.3d 1104, 1113-14 (9th Cir. 2009) which stated:

As before, the debtor must “file timely any statement of intention required 

under section 521(a)(2).” Id. But now, he must “indicate in such statement 

that” he will do one of four things: surrender, redeem, reaffirm, or assume an 

unexpired lease. Id. To be specific, he must indicate “either” surrender “or” 

retention; if he chooses the latter, he must indicate “either” redemption, 

reaffirmation, “or” assumption. Id. “Either” means “[t]he one or the 

other.” American Heritage Dictionary of the English Language 572 (4th 

ed.2000). Although traditionally it has referred to only two items, the 

standards of the English language have degenerated such that either is now 

acceptable with more than two clauses. See id. at 572–73 (usage note). 

However, the “either ... or” disjunction has always meant that one of the 

listed alternatives must be satisfied.

The Court agrees that the use of the disjunctive is indicative of independent actions that 

can take place without each other. If retention is chosen, the statute indicates that 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 16 of

 29
17

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

reaffirmation “or” assumption are viable options. See Dumont, 581 F.3d at 1113-14 (he 

must indicate ‘either’ reaffirmation, ‘or’ assumption.). If one were to view assumption and 

reaffirmation to be bound together, then the bankruptcy code and Ninth Circuit would have 

stated reaffirmation “and” assumption, to indicate the interdependence between the two

sections. The Court finds that the use of the disjunctive in Section 362(h) is a further 

statutory reason to dispense with a requirement for reaffirmation of a Section 365(p) lease 

agreement. 

4. Judicial Supervision

Chief Judge Taylor made two findings regarding judicial supervision: (1) that the 

bankruptcy code does not require close judicial supervision of all reaffirmations and (2) 

the absence of Court approval of Section 365(p)(2) lease assumption does not require a 

different conclusion. 

First, the bankruptcy court found that the Bankruptcy Code does not require close 

judicial supervision of all reaffirmations. Consequently, it was not incongruous to assume 

that Congress would allow personal property lease assumptions without judicial 

supervision. AR 259. At oral argument before the bankruptcy court, Mather conceded that 

Congress did not take a consistent position that judicial supervision is always required 

when a debtor converts a pre-petition obligation to a post-petition debt. One example of 

this inconsistency is that Congress does not require judicial supervision when a pro se 

consumer debtor assumes a consumer loan secured by real property. See 11 U.S.C. § 

524(c)(6)(B) (Subparagraph (A), which requires judicial approval, “shall not apply to the 

extent that such debt is a consumer debt secured by real property”).8 The presence of one 

 

8 The bankruptcy court also referred to a modification of Section 524 in BAPCPA which arguably made 

reaffirmation more creditor friendly, including a provision that made reaffirmation of credit union 

transactions less likely to survive judicial review by eliminating the presumption of “undue hardship.” 

See 11 U.S.C. § 524(m)(2). The Court affords this determination minimal weight in its analysis, finding 

that it is only tangentially related to the issues being considered. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 17 of

 29
18

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

part of Section 524 that does not require judicial approval is indicative of congressional 

willingness to not always require reaffirmation. 

Second, Chief Judge Taylor also found that the absence of court approval for Section 

365(p) lease assumptions did not compel a different conclusion. AR 264. To begin, the 

court reasoned that reaffirmation does not always require judicial oversight. Next, the 

bankruptcy court distinguished Section 365(p) assumptions, which creates obligations of 

the debtor and is generally payable from assets not generally available to pre-petition 

creditors, from Section 365(a) assumptions––which require court approval. The court 

reasoned that Section 365(a) assumptions merited judicial involvement because they 

involved the estate, debtor in possession, chapter 13 debtor, or reorganized debtor and have 

a “direct impact on the availability of assets to pay other creditors, particularly in a chapter 

7 context.” AR 264. Finally, the bankruptcy court observed that Section 365(b) provides 

non-debtor parties with the right for cure and adequate assurance, but that Section 365(p) 

gives the lessor the unilateral right to decide whether to allow assumption and establish 

conditions, thus judicial oversight of a lessor’s unilateral right was not warranted. 

This conclusion is supported by the Court’s holding in In re Perlman concluding 

that Court has “no judicial role to play in § 365(p)(2) lease assumption.” 468 B.R. at 441. 

There, criticizing the practice of filing Section 365(p)(2) lease assumption agreements as 

“reaffirmation agreements” under Section 524, the court concluded that doing so wasted 

the “time and resources” of the court and the parties by implicating unnecessary hearings. 

See id. The Court finds this reasoning to be persuasive and in line with the conclusion that 

Section 365(p) leases do not require judicial approval. 

5. Specific Provisions Control

The bankruptcy judge found that the specific provisions of Section 365(p) 

“arguably” controlled over the general provisions of Section 524. AR 258. This canon 

of statutory construction emphasizes that “[i]t is a commonplace of statutory construction 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 18 of

 29
19

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

that the specific governs the general.” RadLAX Gateway Hotel, LLC v. Amalgamated 

Bank, 566 U.S. 639, 645 (2012). This is particularly true where “Congress has enacted a 

comprehensive scheme and has deliberately targeted specific problems with specific 

solutions.” Id. (citing Varity Corp. v. Howe, 516 U.S. 489, 519 (1996) (Thomas, J., 

dissenting)). The bankruptcy court viewed Section 365 as the “more specific provision” 

because it deals specifically with personal property leases. In contrast, Section 524(c) is 

a broader statute addressing only the impact of discharge. The Court agrees that Section 

365(p) is a more specific provision, but observes that “reasonable minds can differ as to 

which statute is more specific.” AR 258. As Mather points out, Section 524 may 

actually contain more procedural steps and more words than that required in Section 

365(p). Dkt. No. 16 (observing that Section 524––which contains 2,591 words––is over 

twenty times longer than Section 365(p)). Nevertheless, Section 365(p) deals with a 

narrower issue––assumption of leases when a trustee does not seek to assume––than 

Section 524 which applies more generally to post-discharge liabilities. Accordingly, the 

Court finds that Section 365(p) is a more specific provision than Section 524(c) and that 

this canon of construction weighs in favor of not requiring reaffirmation. 

6. BAPCPA Amendments

Chief Judge Taylor held that the fact that Congress did not require reaffirmation 

disclosures relevant to consumer personal property lease transactions when it significantly 

amended the reaffirmation disclosure provisions of Section 524(k) strongly suggests that 

Congress did not intend to require a debtor to both assume a lease under Section 365(p)(2) 

and also obtain reaffirmation under Section 524. AR 261. The bankruptcy court observed 

that BAPCPA simultaneously added both Section 365(p) and Section 524(k),9 which 

outlines the detailed disclosures required for reaffirmation. In doing so, the court observed 

 

9 The bankruptcy court did acknowledge that the requirement for conspicuous disclosure of the amount 

reaffirmed could apply in both the lease and secured loan contexts. AR 260 (citing 11 U.S.C. § 

524(k)(2)-(3)(C)). 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 19 of

 29
20

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

that the vast majority of Section 524(k)’s provisions applied only as to secured transactions, 

rather than personal property leases. See, e.g. 11 U.S.C. § 524(k)(2)-(3)(E) (requiring 

conspicuous disclosure of an “annual percentage rate”); 11 U.S.C. 524(k)(3)(E)(i)-(ii) 

(referencing “credit” and “open end credit plan” as defined in Section 103 of the Truth in 

Lending Act). 

Next, the bankruptcy court observed that the TILA “requires specific disclosures in 

relation to consumer personal property leases that are the counterpart to those required in 

consumer credit transactions. For example, it requires detailed disclosure about liabilities 

at lease termination . . . But no such disclosures were required by BAPCPA and new § 

524(k)(1).” AR 261. Instead, the BAPCPA amendments only reference credit transactions 

portions of the Truth in Lending Act and do not reference provisions related to a consumer 

lease transaction. Consequently, the bankruptcy court reasoned that the fact that Congress 

did not require reaffirmation disclosures relevant to consumer personal property lease 

transactions when it amended Section 524(k) in BAPCPA suggests that Congress did not 

intend to require that a debtor both assume a lease under Section 365(p)(2) and obtain 

reaffirmation under Section 524. Id. To Chief Judge Taylor, it was “illogical to assume 

that Congress would require reaffirmation in a personal property lease assumption situation 

yet require not a single disclosure relevant to a consumer lease beyond the amount 

assumed.” Id.

This reasoning is supportive, to a limited extent, of a rule not requiring reaffirmation. 

As the bankruptcy court acknowledged, Section 524(k)’s requirement to disclose could 

broadly be applied in the lease context. See, e.g., In re Creighton, 427 B.R. at 28 (rejecting 

substantially similar argument and concluding that “[t]he disclosures required by § 524(k) 

are flexible enough to accommodate a wide variety of debts.”). Moreover, the Court does 

not view the lack of a reference to TILA’s consumer lease transaction provisions in the 

BAPCPA disclosure amendments to significantly support that Congress did not intend to 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 20 of

 29
21

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

require reaffirmation in this context. Accordingly, this portion of the bankruptcy court’s 

decision is only somewhat persuasive. 

7. Coherent Statutory Scheme

The bankruptcy court held that it was “not inconsistent with anything in the 

Bankruptcy Code to assume that Congress would create more than one method for allowing 

claims to survive discharge” as the bankruptcy code (1) identifies numerous claims that are 

never dischargeable; (2) allows creditors under certain circumstances to obtain a 

determination that a particular claim is not appropriate for discharge; (3) Section 365 

involves a method to convert dischargeable executory contract claims into nondischargeable post-petition claims through assumption. AR 258. This follows from the 

canon of construction to construe statutory language as a whole. See, e.g., Duparquet Huot 

& Moneuse Co. v. Evans, 297 U.S. 216, 218 (1936). 

The Court affords this canon of construction minimal weight. Just as the plain 

language analysis is inconclusive, the Court finds that the statutory scheme of the 

bankruptcy code as a whole could be viewed to support both requiring and not requiring 

reaffirmation. Accordingly, the Court finds that this canon of construction weighs neither 

in favor nor against requiring reaffirmation. 

D. The Thompson Court’s View and its Progeny Cases 

In Thompson, District Judge Jonker reversed a bankruptcy court by holding that 

Section 524 reaffirmation was required for a Section 365(p) post-discharge enforcement to 

be enforced post-discharge. Specifically, Judge Jonker concluded that “[t]o set aside the 

discharge protection, a lessor must obtain not only the debtor’s assumption but also 

Bankruptcy Court approval under the reaffirmation provisions of section 524(c), or other 

appropriate Code provisions.” 453 B.R. at 824. The bankruptcy court had held that 

assumption under Section 365(p) created a post-petition liability outside the scope of the 

discharge that did not require reaffirmation. Id. at 826. The Thompson court reasoned that 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 21 of

 29
22

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

nothing in Section 365(p) or the plain language explanation on the bankruptcy discharge 

form provided notice to Chapter 7 petitioners that their lease assumption lacks discharge 

protection. Id. Next, the court emphasized that Section 365(p) emphasized possession of 

property, not ultimate liability after discharge. Id. According to that court’s reading, the 

language in Section 365(p)(2) stating “liability under the lease will be assumed” indicated 

that “more is needed for assumption of liability.” Id. at 828. Pointing to Section 524’s 

“web of protections for debtors,” the Thompson court emphasized that requiring 

reaffirmation was in line with the “policy of giving debtors a fresh start.” Id. 

Other courts have reasoned similarly to Thompson to find that reaffirmation was 

required. One of the first cases to address this issue was In re Creighton, 427 B.R. 24, 27 

(Bankr. D. Mass. 2007), which held that a lease assumption agreement constituted 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” under 

Section 524(c), such that Section 365(p)(2) lease assumptions were merely a “species of 

reaffirmation agreement.” Id. The Creighton court emphasized the congressional purpose 

of consumer protection in making this determination and that it would be strange if 

Congress removed a category of reaffirmation agreements from the Section 524(c) 

requirements without a stated reason. Id. at 30. See also In re Eader, 426 B.R. 164, 165 

(Bankr. D. Md. 2010) (emphasizing that BAPCPA increases the protection afforded to 

debtors by adding additional requirements). Reviewing these cases, the court in Garaux

observed that “[b]y executing either a lease assumption or a reaffirmation agreement, 

debtors are releasing substantial and consequential rights, protections and benefits. For this 

reason, the court can find no reason that a debtor should be provided more protection, via 

§ 524(c), under a reaffirmation agreement than a lease assumption.” In re Garaux, 2012 

WL 5193779, at *4. 

Chief Judge Taylor offered three distinct reasons to discount the Thompson line of 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 22 of

 29
23

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

cases. First, the court criticized the Thompson court’s assumption that judicial supervision 

was an absolute requirement for all reaffirmations. AR 266. Second, she concluded that 

the Thompson court had failed to consider the commonly understood consequences of lease 

assumption and that the court had ignored the economics of lease assumption in crafting a 

rule that would render Section 365(p)(2) without meaning, functionally creating a “surplus 

statute with nonsensical terms.” Id. Finally, the bankruptcy court observed that the 

Thompson court required reaffirmation but never explained “why this is appropriate where 

the reaffirmation disclosures created concurrently with § 365(p)(2) are almost entirely 

irrelevant to personal property lease transactions. Concluding that Thompson was 

unreliable, the bankruptcy court held that reaffirmation was not required in this instant 

case. The Court agrees that a lease assumption agreement under § 365(p) remains 

enforceable following discharge even if the lease agreement was not reaffirmed and the 

Court will accordingly elect not to follow the Thompson holding.

E. Analysis

The policy implications of requiring reaffirmation must be weighed against the fact 

that interpreting Section 365(p) to also apply Section 524(c)’s requirements renders the 

former statute superfluous and leads to anomalous results. On one hand, a rule that does 

not require reaffirmation is arguably less protective of bankrupt lessees because it strips

away the potential protection of judicial review provided by the reaffirmation process. 

Doing so may somewhat threaten the “fresh start” being offered by the bankruptcy 

proceeding. 

On the other hand, the Court must also consider the impact of requiring 

reaffirmation. Doing so renders the Section 365(p) statutory process superfluous––If 

Congress had intended to require reaffirmation then it could have simply required the 

negotiation and assumption process of Section 365(p) to be a part of the reaffirmation 

procedures. See In re Bailly, 522 B.R. at 716. Moreover, requiring reaffirmation could 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 23 of

 29
24

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

lead to strange results. A lessor and lessee could agree to a lease assumption under Section 

365(p) and yet a lessor would have no ability to enforce a lease agreement assumed by the 

debtor in the event of subsequent default. In re Mortensen, 444 B.R. at 230. Or a lessor 

could become bound by a lease assumption that the court declines to approve. See In re 

Bailly, 522 B.R. at 716. Moreover, a lessor––who agrees to make an asset available for 

possession in exchange for periodic payments––would have no economic incentive to 

undertake a Section 365(p) lease assumption with a bankrupt lessee. 

Mather argues that the line of case law holding that reaffirmation is not required is 

built upon the foundations of the now reversed Thompson bankruptcy court opinion. See, 

e.g., In re Mortensen, 444 B.R. 225 (Bankr. E.D.N.Y. January 19, 2011); In re Farley, 

451 B.R. 235 (Bankr. E.D.N.Y. 2011); In re Ebbrecht, 2011 WL 1793272 (Bankr. 

E.D.N.Y. May 11, 2011). This argument fails to acknowledge that recent cases have 

continued to adopt the underlying reasoning of these decisions even after the reversal of 

the Thompson bankruptcy court’s opinion. See, e.g., Williams v. Ford Motor Credit Co., 

LLC, 2016 WL 2731191 (E.D. Mich. 2016); In re Hayden, No. 13-10865, 2014 WL 

1612164, at *4 (Bankr. D. Vt. Apr. 22, 2014); In re Perlman, 468 B.R. 437, 441 (Bankr. 

S.D. Fla. 2012).

Another argument Mather makes on appeal is that Section 365(p)’s failure to use the 

word “personal” to modify “liability” means that she has no liability resulting from her 

assumption of the lease unless this liability was reaffirmed on appeal. To support this 

proposition, Mather points to caselaw in insurance law, Foresyth v. Jones, 57 Cal. App. 

4th 776, 781-782 (1997), foreclosure law, In re the Marriage of Walker, 240 Cal. App. 4th 

986, 994 (2015, and ride thru in bankruptcy law, McClellan Fed. Credit Union v. Parker, 

139 F.3d 668 (9th Cir. 1998). These cases and this argument are inapposite to the instant 

issue as they do not involve the intersection of Section 365(p) and Section 524(c). 

Moreover, no court requiring reaffirmation has ever relied on such a theory. See, e.g., 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 24 of

 29
25

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Thompson, 453 B.R. at 823; In re Garaux, 2012 WL 5193779, In re Eader, 426 B.R. at

164, In re Creighton, 427 B.R. at 24. 

The same reasons discount Mather’s attempt to differentiate between the “liability” 

and “enforceability” of a claim. Midland Funding, LLC v. Johnson, 137 S. Ct. 1407 (2017) 

does not involve an analysis of Section 365(p) and any attempt to extrapolate a difference 

between liability and enforcement from this case is inapposite from the instant legal 

question. Furthermore, such a theory has never been the basis of any of the case law 

requiring reaffirmation which instead emphasize the language of the statute and the policy 

rationale of the bankruptcy code to provide a “fresh start” to debtors. 

Finally, Mather cites to Bankruptcy Judge Mann’s February 14, 2018 order 

denying a reaffirmation agreement in In re Talley, Case No. 17-05752-MM7, Dkt. No. 19 

(Bankr. S.D. Cal. Jan. 18, 2018) to argue that the Court allowed “ride thru,” allowing the 

debtor to keep the vehicle as payments were made but removing “personal liability.” 

Dkt. No. 16 at 11 n. 3. Talley is inapposite to the facts of this case, in that the Court 

determined the lease at issue in that case to actually be a secured transaction, and thus did 

not involve the process set forth in Section 365(p). 

For the reasons described above, the Court AFFIRMS Chief Judge Taylor’s 

conclusion that Section 365(p) does not require reaffirmation. In reaching this 

conclusion, the Court finds particularly persuasive that: (1) Section 365(p) is rendered 

superfluous by requiring reaffirmation; (2) requiring reaffirmation leads to anomalous 

results; (3) Section 362(h)’s use of the disjunctive indicates that assumption and 

reaffirmation are independent actions; (4) judicial supervision is not required of all 

reaffirmations and the lack of judicial approval makes sense in the context of the Section 

365(p) which allows a lessor the power to choose whether to allow assumption; and (5) 

Section 365(p) is more specific than Section 524(c). The Court finds less compelling (1) 

that amendments to BAPCPA delineate between secured transactions and lease 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 25 of

 29
26

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

assumptions and (2) that the bankruptcy scheme as a coherent whole supports this 

conclusion. Accordingly, the Court concludes that Section 524(c) reaffirmation is not

required for a Section 365(p) lease to be enforced post-discharge. 

F. Compliance with Section 365(p)––Was the Lease Assumed? 

The Court next considers whether Toyota obtained a valid assumption of the lease. 

Appellant argues that the Lease Assumption Agreement did not comply with writing and 

time requirements that she asserts are “mandatory” under 365(p)(2). Dkt. No. 9 at 30. 

Appellant asserts that it was error for the bankruptcy court to ignore (1) the requirement 

for Mather to have provided an initial writing requesting lease assumption under 

365(p)(2)(A) and (2) that Mather acted on December 5, 2016 well past the thirty day 

requirement established in 365(p)(2)(B). 

Chief Judge Taylor found that although there was “arguably” a written notification 

based on Mather’s indication in her statement of intention that she intended to enter into a 

reaffirmation agreement with Toyota, the court did not find that sufficient to constitute a 

written notification regarding assumption of leases within the meaning of § 365(p)(2)(A). 

AR 269. However, the bankruptcy court concluded that written notification was “not 

absolutely required” as Toyota had the right to waive the writing requirement. AR 269-

270. 

Section 365(p)(2) provides that: 

(A) If the debtor in a case under chapter 7 is an individual, the debtor may 

notify the creditor in writing that the debtor desires to assume the lease. 

Upon 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.

(B) If, 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.

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 26 of

 29
27

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(C) The stay under section 362 and the injunction under section 524(a) (2) 

shall not be violated by notification of the debtor and negotiation of cure 

under this subsection.

This process providing for a “consensual, non-judicial procedure for the assumption of a 

personal property lease by a debtor if the lease has been rejected or not timely assumed by 

the chapter 7 trustee under 365(d)” involves a distinct process described in In re Ebbrecht, 

451 B.R. 241, 244 (Bankr. E.D.N.Y. 2011), as follows:

In what some refer to as a “handshake,” the debtor must first offer in writing 

to the lessor7to assume the lease obligations, the timing of which is not 

established by the Bankruptcy Code or Rules. The lessor then must decide 

whether to accept such offer, the timing of which is also not specified. If the 

lessor determines that it is willing to allow the debtor to assume the lease, it 

will then notify the debtor of this decision, and may condition such 

assumption on cure of any outstanding defaults on terms set by the contract. 

Section 365(p) does not provide that the lessor is under any obligation to 

accept the debtor's offer.

Once the debtor has notified the lessor of its desire to assume the lease under 

Section 365(p)(2)(A), Section 365(p)(2)(C) provides the lessor with a safe 

harbor to notify debtor it has accepted the request to assume the lease and to 

negotiate a cure, without violating either the automatic stay of Section 362 

or the discharge injunction under Section 524(a)(2). The third and final step 

required by the statute is that a writing between the lessor and the debtor be 

signed to memorialize the terms of the lease assumption.

In re Ebbrecht, 451 B.R. 241, 244–45 (Bankr. E.D.N.Y. 2011) (internal citations omitted). 

As the bankruptcy court found, the written notification requirement accomplishes 

three distinct purposes: (1) alert the lessor that debtor is interested in an assumption––the 

“handshake”; (2) provides the lessor with safe harbor protections under Section 

365(p)(2)(C) so that the lessor may enter into negotiations without violating the automatic 

stay or discharge order; and (3) a filed written statement forestalls the termination of an 

automatic stay under Section 362(h). AR 269. Chief Judge Taylor found that the writing 

requirement was only relevant to be a passport to safe harbor and a method to preserve the 

automatic stay, and was not an absolute requirement for assumption to occur. 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 27 of

 29
28

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Consequently, the lessor negotiated at its own risk in the event that a debtor denied 

initiating the procedure or extending the handshake and could waive this requirement. See 

Williams, 2016 WL 2731191, at *8 (allowing waiver of procedural requirements of Section 

365(p) where lease assumption was eventually entered into by both parties). The Court 

agrees that in a case where an assumption agreement is ultimately signed, the lack of a 

written notification does not invalidate it, and that Toyota had the right to waive the 

requirement of a writing in the lease negotiation process. AR 270. 

Next, the bankruptcy court concluded that the lease was properly assumed despite 

the fact that Mather did not notify Toyota in writing that the lease was assumed within 30 

days as required by Section 365(p)(2)(B). Section 365(p)(2) requires that the debtor notify 

the lessor in writing that “the lease is assumed no later than 30 days after the lessor notifies 

the debtor that it is willing to have the lease assumed. The Court affirms this conclusion 

because the 30-day period is for the benefit of the lessor and can be waived by the lessor if 

it so chooses to engage in the assumption. See Williams v. Ford Motor Credit Company, 

LLC, 2016 WL 2731191, at *8 (“When Appellants executed the Agreement after the 30-

day notice period, Ford – and not Appellants – had the right to reject the executed 

Agreement. But Ford accepted the Agreement without objection; Ford therefore chose to 

waive any right it may have had to reject the Agreement for Appellants’ noncompliance 

with 11 U.S.C. § 365(p)(2)(B).”). 

Finally, significant policy rationales support allowing Toyota to waive these 

requirements to validly enforce a lease assumption. As the bankruptcy court observed, 

“the policy of allowing a debtor to assume a personal property lease obligation, particularly 

for something as critical as an automobile, is not well served if assumption is impossible 

in the absence of strict compliance with the writing and timing requirements.” AR 270.

Notably, while the debtor loses the right to compel lease assumption if the lease is not 

assumed timely, the lessor takes on a risk when it proceeds with an assumption in the 

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 28 of

 29
29

17cv2380-GPC-AGS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

absence of an oral request. Where both lessor and debtor remain willing to proceed on an 

oral request for assumption, and where the lessor remains willing to allow assumption after 

30 days, it does not make sense to establish strict requirements with the statute that would 

deprive the debtor of the opportunity to assume. Accordingly, as a policy matter, it makes 

sense to allow Toyota to waive the written notification and timing requirements. 

Accordingly, the Court AFFIRMS the bankruptcy court determinations that Toyota 

obtained a valid lease assumption because the written notification and the 30-day 

requirement could be waived by Toyota. 

CONCLUSION 

For the reasons stated above, IT IS HEREBY ORDERED that the November 16, 

2017 Bankruptcy Court Order is AFFIRMED.

IT IS SO ORDERED. 

Dated: May 23, 2018

Case 3:17-cv-02380-GPC-AGS Document 18 Filed 05/24/18 PageID.<pageID> Page 29 of

 29