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.