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Bankruptcy Court Authorizes Rejection of Employment Separation Agreements

The Bankruptcy Code can be an effective tool for reducing liabilities and enhancing asset value for the benefit of creditors. One of the more important…

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The Bankruptcy Code can be an effective tool for reducing liabilities and enhancing asset value for the benefit of creditors. One of the more important tools is the right not only to assume favorable contracts pursuant to Section 365, but also to reject those that are not. Section 365 allows a debtor to pick and choose those agreements that it believes provide the best opportunity to reorganize or alternatively, sell its assets. However, any agreement subject to assumption or rejection must be executory, i.e., both parties must have material unperformed obligations on the date of the bankruptcy filing.

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