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The bankruptcy process
Assumption
Assumption is the choice to keep a contract or lease going in bankruptcy and continue to perform it, subject to court approval. 1
Talk to a lawyerHow it works
It applies to executory contracts, where both sides still have material duties to perform, and to unexpired leases. The trustee may assume or reject them, subject to the court's approval. 2 1
Keeping the contract means catching up. If there has been a default, the contract or lease can be assumed only if the default is cured or there is adequate assurance it will be promptly cured, the other side is compensated for its actual money loss, and there is adequate assurance of future performance. 2
For a leased car or other leased personal property in Chapter 7, an individual can tell the creditor in writing that they want to assume the lease. The creditor may agree and may make that depend on curing any default. If the debtor then confirms in writing within 30 days that the lease is assumed, the lease liability belongs to the debtor, not the estate. 2
A Chapter 13 plan may provide for assuming or rejecting a contract or lease. A personal property lease that is not assumed in the confirmed plan is treated as rejected. 3 2
Common questions
What happens if a car lease is not assumed?
If a lease of personal property is rejected or not assumed in time, the leased property is no longer part of the bankruptcy estate and the automatic stay ends for it. 2
Does the creditor have to agree when an individual asks to assume a lease in Chapter 7?
No. The law says the creditor may, at its option, say it is willing. 2
Sources
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