You may have a lease and not even know it. But if you are in a situation where you are considering the advantages of bankruptcy protection as a means of recovering financial stability, you need to be aware that leases carry ramifications in the bankruptcy process. We outlined some of the specifics in an article about this particular topic.
The title of the piece had to do with executory contracts in bankruptcy. That’s a very esoteric sounding word and might lead some Nashville readers to assume they have never touched such a document. But the reality is that in this day and age, nearly everyone is operating under an executory contract of one kind or another.
If you rent a house or an apartment, you’re participating in an executory contract. If you rent a musical instrument, the same applies. Auto leases fall into this category as well. And unless the cellphone in your pocket is one of those prepaid types, you have an executory agreement with your carrier.
The simple definition of an executory contract is any agreement under which one side has an obligation to deliver or provide a good or service and the other side has an obligation to pay a set monthly fee in return.
When a person files for bankruptcy, whether it is Chapter 7 or Chapter 13, the law requires that the filer list his or her assets. Not only do the various leasing or executory contract agreements you have need to be listed, but they have to be captured on a separate form. And regardless of which chapter you file under, you have 60 days from the date of filing to decide whether to keep (assume) or end each lease.
What this all serves to indicate is that to avoid errors and proceed with confidence, it is advisable to work with a bankruptcy attorney.