Rebuilding Personal Credit After Bankruptcy

An executory contract is one where both sides still have substantial commitments delegated carry out. In other words, neither celebration has actually totally completed what they concurred to do. Typical examples of executory agreements in an organization context consist of: Equipment leases Supply and vendor arrangements Service agreements Software application licenses Business realty leases These are the kinds of agreements that often become crucial when a company files for bankruptcy.

, when a business files for personal bankruptcy, it gains the right to either presume or reject its executory contracts. Presuming a contract implies the organization concurs to continue following it going forward.

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The other celebration to the contract does not get to choose whether the contract is assumed or declined. The objective is to keep the company alive while restructuring its financial obligations. That is why there is much more versatility in how contracts are dealt with in Chapter 11 than in a liquidation.

Under 11 U.S.C. 365, the decision can normally be made at any point before the court validates the reorganization strategy. The other party to the agreement can ask the court to set a deadline if the unpredictability is triggering them damage. If the business decides to assume an agreement in Chapter 11, it needs to do so in complete.

365(b), this implies curing any missed payments or defaults, compensating the other celebration for any losses triggered by those defaults, and offering adequate assurance that it can perform going forward.

Expert Advice for Bankruptcy

Under 11 U.S.C. 365(d)( 1 ), in a Chapter 7 case, the trustee has 60 days from the date of submitting to decide whether to assume an executory contract. If the trustee does not presume the agreement within that window, it is immediately considered declined.

When an agreement is declined in Chapter 7, the other party is again left with a basic unsecured claim versus the bankruptcy estate. In a liquidation, those claims are frequently paid very little or absolutely nothing at all, depending upon how much is left after secured lenders are paid. Many business contracts include provisions that state the contract automatically ends or can be terminated if one celebration apply for insolvency.

Under 11 U.S.C. 365(e), ipso facto stipulations are typically not enforceable in bankruptcy. An agreement can not simply be ended simply because a bankruptcy was filed.

Attorney Vicky Fealy is Board-Certified in Consumer Bankruptcy Law by The Texas Board of Legal Expertise. She has assisted thousands of individuals and organizations with financial obligation relief, and she is ready to direct you through every step.

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(Post Updated Jan. 6 and 8, 2026) This post notes federal and state consumer law modifications set up to enter into impact or end throughout the period from December 1, 2025, through January 1, 2027. Other customer law modifications will be enacted in 2026 and will enter into result in 2026; this article lists changes whose efficient dates have actually already been scheduled since December 31, 2025.

Key Strategies for Filing

Essential modifications to Bankruptcy Rule 3002.1 and 6 related new bankruptcy forms went into effect on December 1, 2025. The changes safeguard property owners who use chapter 13 personal bankruptcies to stave off foreclosures and keep themselves existing on their home loans, providing them details required to successfully finish a treatment strategy and emerge from chapter 13 without surprise, undisclosed fees, or payment amounts due.

New Rule 8006(g) will clarify that any celebration to an appeal may file a request that a court of appeals license a direct appeal. 26 U.S.C. 108(a) offers that particular forgiveness on a home loan is ruled out income for income tax functions, but the Qualified Principal House Indebtedness Exemption from Income expired at the end of 2025.