Author: Andrew M. Thaler
Chapter 11 reorganization allows the debtor to reject undesirable leases. If the debtor opts to reject the lease, the landlord is left with a breach of contract claim. In most instances rejection claims against the bankruptcy estate will be for less than the remaining rents under the lease as the claim is capped pursuant to the bankruptcy code.
Alternatively, the debtor can elect to assume the lease. Assumption requires the debtor to cure all prepetition defaults, including payment of all past due rents, on assumption. The debtor has 120 days, which can in certain circumstances be extended another 90 days, to assume or reject the lease. During the time debtor decides to assume or reject the lease, all post-petition obligations, including payment of rent must be paid. The court may “for cause” extend the time for performance of any post-petition rent, for up to an additional 60 days.
Alternatively, the debtor can elect to assume the lease. Assumption requires the debtor to cure all prepetition defaults, including payment of all past due rents, on assumption. The debtor has 120 days, which can in certain circumstances be extended another 90 days, to assume or reject the lease. During the time debtor decides to assume or reject the lease, all post-petition obligations, including payment of rent must be paid. The court may “for cause” extend the time for performance of any post-petition rent, for up to an additional 60 days.
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