What happens to leases?

Minneapolis Bankruptcy attorney Steven Silton explains what happens to leases in creditor debtor setting when something goes wrong.

Contact Steven Silton

Email: [email protected]

Phone: (612) 260-9003

Transcript:

In a Chapter 11 bankruptcy, the debtor has the right to either affirm, in other words keep the lease at which point they need to pay back any and all arrearages that are owed, or they can reject the lease. They can simply say that they no longer want to continue to honor the lease, and reject it at which point that lease is no longer an obligation of the debtor.

The lessor will have rights to an unsecured claim in bankruptcy, but that lease will no longer exist. It’s a fairly substantial right of a debtor under a Chapter 11 bankruptcy, and in some circumstances, it can be a main reason why a debtor files bankruptcy.