## Facts

- Paul L. Cumbess leased an HVAC unit for his residence from Microf LLC in 2015.
- Cumbess filed a Chapter 13 petition in 2017.
- The confirmed Chapter 13 plan provided that: (1) prepetition arrears owed to Microf would be paid by the trustee pro rata through the plan; (2) “[t]he lease to Microf is assumed”; and (3) Cumbess (not the trustee) would act as the disbursing agent for ongoing monthly lease payments.
- The Chapter 13 trustee did not file or otherwise execute a separate assumption of the lease before plan confirmation.
- After confirmation, Cumbess failed to make multiple postpetition lease payments, accruing a postpetition delinquency of about $1,763.95.
- Microf sought allowance of an administrative expense for the missed postpetition payments under 11 U.S.C. §§ 503(b)(1)(A) and 507(a)(2).
- The bankruptcy court denied administrative-expense treatment; the district court affirmed.

## Issues

1. Whether, under 11 U.S.C. § 365(p)(1), a Chapter 13 debtor’s confirmed plan statement that a personal-property lease is “assumed” can substitute for assumption “by the trustee.”
2. Whether unpaid postpetition installments on a personal-property lease are entitled to administrative-expense priority under 11 U.S.C. § 503(b)(1)(A) when the trustee did not assume the lease.
3. Whether the creditor showed the postpetition lease obligations were actual and necessary costs of preserving the bankruptcy estate.

## Decision

- The Eleventh Circuit affirmed the denial of Microf’s request for administrative-expense priority.
- Section 365(p)(1) applies as written: if a personal-property lease is not timely assumed by the trustee, the leased property is no longer property of the estate.
- Because the trustee did not assume the Microf lease, the lease dropped out of the estate upon confirmation.
- Microf was not entitled to administrative-expense priority for the postpetition missed payments because the lease obligations were not shown to preserve the estate and did not automatically become administrative expenses based on debtor default.

## Legal Principles

- Under 11 U.S.C. § 365(p)(1), assumption “by the trustee” is required to keep a personal-property lease within the bankruptcy estate; if not timely assumed, the leased property is no longer property of the estate.
- Administrative-expense priority under 11 U.S.C. § 503(b)(1)(A) requires proof that the expense was an actual, necessary cost of preserving the estate; priority does not arise automatically from postpetition nonpayment.
- A plan’s statement that a lease is “assumed,” without trustee assumption where § 365(p)(1) applies, does not establish administrative priority for postpetition lease payments.

## Conclusion

The Eleventh Circuit held that § 365(p)(1) means what it says: a personal-property lease remains in the estate only if timely assumed by the trustee, and absent such assumption, a creditor cannot obtain administrative-expense priority for missed postpetition lease payments without proving an actual and necessary benefit to the estate.


Microf LLC v. Cumbess (In re Cumbess), 960 F.3d 1325 (11th Cir. 2020)