A is for Assumption

A is for Assumption

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 reorganization or Chapter 13 individual  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 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

By | 2016-10-18T13:35:39+00:00 November 3rd, 2011|Categories: Bankruptcy Alphabet, Bankruptcy Law|21 Comments

About the Author:

Attorney Mark Markus has been practicing exclusively bankruptcy law in Los Angeles, California since 1991. He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization, AV-Rated by martindale.com, and A+ rated by the Better Business Bureau. Google Plus

21 Comments

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