Commercial Lease Assumption Under Chapter 11 Bankruptcy

Given the potentially harsh consequence of failing to timely assume a vital lease, a Chapter 11 debtor must be vigilant to avoid a forfeiture. It is important to know, however, that all might not be lost even if the debtor misses this deadline. The Bankruptcy Code allows a debtor to assume an executory contract at any time up to confirmation of a plan of reorganization. There is case law supporting the proposition that separate lease agreements and contracts executed as part of a single, integrated transaction should be construed as a single agreement so the lease may be assumed even if the Bankruptcy Code's shorter deadlines for assumption and rejection of commercial leases has expired. Accordingly, a debtor may have until plan confirmation to assume a commercial lease that was signed as part of a single integrated agreement that includes other executory contracts.

Deadlines to Assume or Reject Executory Contracts and Unexpired Leases Under the Bankruptcy Code

The Bankruptcy Code permits a trustee (or debtor in possession) to "assume or reject any executory contract or unexpired lease of the debtor." 11 U.S.C. §365(a). Generally, a debtor may assume or reject leases of residential or personal property and executory contracts at any time before confirmation of a plan. See, 11 U.S.C §365(d)(2).