Legal Standards to File

An executory agreement is one where both sides still have significant commitments left to carry out. Simply put, neither celebration has fully finished what they agreed to do. Typical examples of executory agreements in a service context include: Devices leases Supply and supplier arrangements Service agreements Software licenses Business real estate leases These are the kinds of agreements that typically end up being essential when a service apply for personal bankruptcy.

365, when a business declare personal bankruptcy, it gains the right to either assume or reject its executory contracts. That choice has major effects for everyone included. Presuming an agreement suggests business accepts continue following it moving forward. Declining a contract suggests the company ignores it.

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The other celebration to the contract does not get to decide whether the contract is presumed or turned down. The objective is to keep the organization alive while restructuring its financial obligations. That is why there is much more versatility in how contracts are treated in Chapter 11 than in a liquidation.

Under 11 U.S.C. 365, the decision can usually be made at any point before the court verifies the reorganization strategy. The other celebration to the contract can ask the court to set a deadline if the uncertainty is triggering them damage. If the service chooses to assume an agreement in Chapter 11, it should do so completely.

365(b), this indicates treating any missed payments or defaults, compensating the other celebration for any losses triggered by those defaults, and offering appropriate assurance that it can carry out going forward.

Evaluating Chapter 7 and Chapter 13

Under 11 U.S.C. 365(d)( 1 ), in a Chapter 7 case, the trustee has 60 days from the date of filing to choose whether to assume an executory contract. If the trustee does not presume the contract within that window, it is immediately considered declined.

When an agreement is declined in Chapter 7, the other party is once again entrusted a general unsecured claim against the personal bankruptcy estate. In a liquidation, those claims are frequently paid extremely little or nothing at all, depending upon just how much is left after protected lenders are paid. Many company contracts contain clauses that say the contract instantly ends or can be terminated if one party declare personal bankruptcy.

Under 11 U.S.C. 365(e), ipso facto stipulations are typically not enforceable in insolvency. An agreement can not simply be ended simply since a bankruptcy was filed.

Attorney Vicky Fealy is Board-Certified in Consumer Personal Bankruptcy Law by The Texas Board of Legal Specialization. She has assisted thousands of people and organizations with financial obligation relief, and she is ready to direct you through every step. Contact us to arrange a totally free assessment with our Galveston, TX bankruptcy attorney today.

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(Article Updated Jan. 6 and 8, 2026) This post lists federal and state customer law changes set up to go into impact or end throughout the period from December 1, 2025, through January 1, 2027. Other consumer law changes will be enacted in 2026 and will go into result in 2026; this short article notes changes whose effective dates have already been set up as of December 31, 2025.

Professional Legal Assistance in 2026

NCLC motivates readers to submit (to) additional customer law modifications reliable in 2026, especially changes in state customer legislation. NCLC will include proper submissions to this short article. Important changes to Personal bankruptcy Rule 3002.1 and six associated new bankruptcy kinds went into impact on December 1, 2025. The changes safeguard house owners who use chapter 13 bankruptcies to ward off foreclosures and keep themselves existing on their mortgages, providing details required to successfully complete a treatment strategy and emerge from chapter 13 without surprise, undisclosed charges, or payment quantities due.

New Guideline 8006(g) will clarify that any party to an appeal may submit a request that a court of appeals authorize a direct appeal. 26 U.S.C. 108(a) offers that specific forgiveness on a home mortgage loan is not considered income for earnings tax purposes, but the Qualified Principal Residence Indebtedness Exclusion from Income ended at the end of 2025.