Under which chapters can a debtor assume or reject a true lease?

Under which chapters can a debtor assume or reject a true lease?

• A. Chapter 7 and Chapter 12
• B. Chapter 11 and Chapter 13
• C. All chapters
• D. Chapter 12 only

Answer: (B)

When a bankruptcy case involves unexpired contracts or true leases, the key mechanism is the debtor’s ability to assume or reject executory contracts under 11 U.S.C. § 365. Whether the debtor can actually do that depends on the chapter. In Chapters 11 and 13, the debtor in possession (Chapter 11) or the individual debtor (Chapter 13) retains control over the estate’s contracts and can decide to assume or reject a true lease as part of the restructuring or repayment plan, with the court’s approval and requirements to cure defaults or compensate the other party. This flexibility is why a debtor can both keep a favorable lease (through assumption) or discard burdensome obligations (through rejection). In a Chapter 7 case, the focus is liquidation, and the trustee handles the estate’s contracts. While a trustee may reject burdensome contracts to maximize value, the option for the debtor to actively assume a true lease as part of a plan isn’t the operative path in Chapter 7. That liquidation context is why the ability to assume or reject a true lease is associated with the reorganization chapters. To summarize, the debtor has the practical ability to assume or reject a true lease in Chapters 11 and 13, with the other chapters not providing that same pathway.

When a bankruptcy case involves unexpired contracts or true leases, the key mechanism is the debtor’s ability to assume or reject executory contracts under 11 U.S.C. § 365. Whether the debtor can actually do that depends on the chapter.

In Chapters 11 and 13, the debtor in possession (Chapter 11) or the individual debtor (Chapter 13) retains control over the estate’s contracts and can decide to assume or reject a true lease as part of the restructuring or repayment plan, with the court’s approval and requirements to cure defaults or compensate the other party. This flexibility is why a debtor can both keep a favorable lease (through assumption) or discard burdensome obligations (through rejection).

In a Chapter 7 case, the focus is liquidation, and the trustee handles the estate’s contracts. While a trustee may reject burdensome contracts to maximize value, the option for the debtor to actively assume a true lease as part of a plan isn’t the operative path in Chapter 7. That liquidation context is why the ability to assume or reject a true lease is associated with the reorganization chapters.

To summarize, the debtor has the practical ability to assume or reject a true lease in Chapters 11 and 13, with the other chapters not providing that same pathway.