This is the first in a series of articles on the bankruptcy alphabet
We all make assumptions…about other people, about circumstances, events, expectations. In bankruptcy and the financial world, “assumption” means something different. It means essentially to “take over”.
In bankruptcy, a Trustee or debtor is able to assume certain obligations and reject others. For example, if there is a executory contract¹ or an unexpired lease that a debtor (or the Trustee) wants to continue with, such as for a building or a vehicle, it can be assumed, or it can be rejected. If it is assumed, then all of the obligations (such as making the monthly payments and other contractual requirements) remain in force and effect despite the bankruptcy.
Assumption usually takes place in Chapter 11 or Chapter 13 cases where the debtor is operating a business and wants to continue operating out of a specific location that is being leased, or where certain contracts (such as exclusive listing agreements in real estate). Section 365 of the bankruptcy code sets out requirements to assume (or reject) unexpired leases and executory (not fully performed) contracts.
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¹ A contract is “executory” if the obligations of both parties are so far unperformed that the failure of either to complete performance would be a material breach of the contract.
See more on the letter A in bankruptcy
- A Is For Attorney
- Abandonment in bankruptcy by Jay Fleischman
- A is for Avoidance
- A is for Automatic Stay
- A is for Acceptance
- A is for Assumption
- A is for Adversary Proceeding
- A is for Arrest
- Assumptions You Need To Rethink
- A is for Alimony
- A is for Assets
- A is for Ask
- A is for Assets
- A is for Advantages
- A is for Avoidance
- A is for Attachment
- A is for Automatic Stay
A detailed list of other writing on the bankruptcy alphabet
And still more:
Bret Nason discusses Abuse, Christine Wilton discusses Applications, Monica Shepard analyzes Assets, as does Cate Eranthe . Cathy Moran assumes, Daniel Winter on attorneys, Kyle Lindsay discusses the Automatic Stay, as does Peter Behrmann and William E. Carter; Bob Doig invests his blog time on Automobiles, Dorota Trzeciecka on Amendments, Shawn Wright on Abuse
Image courtesy of Brett Jordan
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