What does it mean when a debtor / commerical tenant "rejects a lease"?
Full Question:
Answer:
Section 365 of the United States Bankruptcy Code allows a debtor, with the court’s approval, to assume or reject executory contracts and unexpired leases that are part of the bankruptcy estate. It is designed to give a reorganizing debtor an opportunity to withdraw from burdensome contractual obligations, while maintaining beneficial contracts. If a debtor assumes an unexpired lease, the landlord must continue leasing the affected property to the debtor. If the debtor rejects a lease, the rejection is treated as a breach of contract occurring immediately before the commencement of the bankruptcy case. Although rejection gives the property owner a claim against the debtor’s estate, this claim is not given any priority over those of unsecured creditors.
