Table of Contents
- How to Prepare for Lease and Contract Issues Before Filing a Business Bankruptcy
- Why Lease And Contract Preparation Matters Before Filing
- What Counts As A Lease Or Contract Problem In Bankruptcy
- 1. Build A Complete Contract And Lease Inventory
- 2. Separate Critical Agreements From Nonessential Ones
- Essential To Ongoing Operations
- Potentially Burdensome Or Overpriced
- Valuable But Transfer-Sensitive
- 3. Review Defaults, Arrearages, And Cure Exposure
- 4. Pay Special Attention To Commercial Real Estate Leases
- 5. Identify Assignment Issues Before They Become Sale Problems
- 6. Look For Hidden Termination And Default Triggers
- 7. Review Personal Guarantees And Cross-Default Language
- 8. Check Whether The Contract Is Even Still Executory
- 9. Match The Contract Strategy To The Bankruptcy Strategy
- If The Business Is Trying To Reorganize
- If The Business Is Planning A Going-Concern Sale
- If The Business Is Preparing For An Orderly Wind-Down
- 10. Prepare The Documents Counsel Will Ask For
- 11. Understand That Local Rules And Procedure Also Matter
- 12. Know When Early Legal Analysis Can Change The Outcome
- Common Questions Businesses Ask Before Filing
- Can Bankruptcy Cancel Any Contract The Business No Longer Wants?
- Can A Business Keep A Lease If It Is Behind On Payments?
- Can A Landlord Terminate The Lease Just Because The Business Filed?
- Does This Only Matter In Large Chapter 11 Cases?
- Is This Mostly About Retail Store Leases?
- A Short Summary Before You Talk To Counsel
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How to Prepare for Lease and Contract Issues Before Filing a Business Bankruptcy
If your business is considering bankruptcy, leases and contracts often become some of the most important moving pieces in the entire case. A warehouse lease, equipment rental, franchise agreement, software subscription, vendor deal, or customer contract can shape whether the business has a realistic path forward — or whether the filing gets more expensive, slower, and harder to manage.
That’s because bankruptcy does not simply “wipe out” every ongoing obligation. In many cases, the business may be able to keep certain agreements, walk away from others, or assign valuable contracts to a buyer, but those options often come with deadlines, cure obligations, and negotiation issues under 11 U.S.C. § 365. The earlier those issues are identified, the more room there is to plan.
In this post you’ll learn how to prepare for lease and contract issues before filing a business bankruptcy, what documents and risks to review, which deadlines often matter most, and where an experienced bankruptcy attorney may add value when the contracts are tied to business continuity.
Why Lease And Contract Preparation Matters Before Filing
For many businesses, the real value of the company is tied up in relationships and operating rights rather than hard assets. A restaurant may depend on its location lease. A manufacturer may rely on supply contracts. A service business may run on software, licensing, and customer agreements. A franchise may depend on both its premises and brand agreement.
Bankruptcy law treats many of these arrangements as executory contracts or unexpired leases, which generally means there are material obligations remaining on both sides. Section 365 gives a debtor tools to assume, reject, or sometimes assign those agreements, subject to court approval and other limits under the Bankruptcy Code. The Department of Justice’s guidance for bankruptcy matters also describes executory contracts and unexpired leases as a core chapter 11 issue because they can affect administration, reorganization, and asset sales. DOJ overview, U.S. Code
This area gets even more important in a period when bankruptcy filings have been rising. According to the federal judiciary, total bankruptcy filings increased in 2025, and business chapter 11 cases remained a meaningful share of business petitions. U.S. Courts annual judiciary statistics, U.S. Courts filing update
What Counts As A Lease Or Contract Problem In Bankruptcy
Before filing, it helps to think broadly. “Lease and contract issues” often include far more than rent and office space.
Common examples include:
- Commercial real estate leases
- Equipment leases
- Vehicle leases
- Franchise agreements
- Distributor and supply agreements
- SaaS and software license agreements
- Maintenance and service contracts
- Customer fulfillment agreements
- Intellectual property licenses
- Warehousing and logistics contracts
- Construction subcontracts
- Merchant processing agreements
Some agreements may look routine in day-to-day operations but become high-stakes once a filing is on the table. If a business misses a deadline to assume a lease, falls behind on post-petition obligations, or cannot satisfy cure requirements, the agreement may no longer be available on terms the business expected.
If you want a deeper explanation of how these agreements are treated once a case is filed, it may help to read our guide on what happens to ongoing business deals and leases in bankruptcy.
1. Build A Complete Contract And Lease Inventory
One of the most common pre-filing problems is that the business does not actually know what it has signed.
In practical terms, preparation often starts with a centralized inventory listing every active lease and contract, along with:
- Legal name of the counterparty
- Effective date
- Expiration date
- Renewal terms
- Termination rights
- Notice requirements
- Default provisions
- Assignment restrictions
- Personal guarantees
- Security deposits, letters of credit, or collateral
- Current payment status
- Any pending disputes or claimed breaches
This exercise often surfaces issues that were hidden in separate departments. Operations may know about a copier lease that finance overlooked. The sales team may have customer rebates or service-level commitments buried in master service agreements. A landlord may have sent a default notice that never made it to restructuring counsel.
A bankruptcy attorney will often want this information early because the schedules, first-day strategy, cash flow planning, and case timeline can all depend on it.
2. Separate Critical Agreements From Nonessential Ones
Not every contract deserves the same attention. Some are central to survival. Others are expensive distractions.
A useful planning framework is to group agreements into three categories:
Essential To Ongoing Operations
These are agreements the business may want to preserve if it intends to reorganize or sell as a going concern. Think headquarters, manufacturing facilities, core software, key supplier deals, or major customer contracts.
Potentially Burdensome Or Overpriced
These are agreements that may be draining liquidity or no longer fit the business model. In some cases, rejection becomes part of the restructuring strategy.
Valuable But Transfer-Sensitive
These include contracts or leases that could add value in a sale but may have anti-assignment language, consent issues, or industry-specific restrictions.
This kind of sorting can make conversations with counsel far more productive. It also helps management focus on where cure money, negotiation energy, and court attention may actually matter.
3. Review Defaults, Arrearages, And Cure Exposure
A business considering chapter 11 often enters the process with some degree of payment stress. That matters because assumption typically comes with cure obligations.
Under 11 U.S.C. § 365(b), if there has been a default, assumption generally requires curing the default or providing adequate assurance that the default will be promptly cured, compensating for certain actual pecuniary losses, and providing adequate assurance of future performance. In general terms, that can translate into real money very quickly.
For that reason, pre-filing review often includes:
- Past-due base rent
- Additional rent, CAM, taxes, and insurance charges
- Late fees and interest claims
- Missed equipment payments
- Unpaid vendor invoices
- Default-rate pricing
- Nonmonetary defaults, such as insurance lapses or reporting failures
- Contractual attorney’s fees claimed by the counterparty
Some businesses discover that a “critical” lease is only worth saving if the cure amount is manageable. Others find that a vendor contract they planned to keep has a disputed default history that may complicate assumption.
This is also why many bankruptcy disputes involve cure amount notices and fights over what exactly is owed. A pre-filing estimate is not perfect, but it often provides a more realistic view of restructuring options.
4. Pay Special Attention To Commercial Real Estate Leases
Commercial leases often move to the top of the list because the Bankruptcy Code places special timing pressure on nonresidential real property leases.
Under 11 U.S.C. § 365(d)(4), in chapter 11, an unexpired lease of nonresidential real property is deemed rejected if the debtor does not assume or reject it by the earlier of plan confirmation or 120 days after the order for relief, subject to one possible 90-day extension for cause, with further extensions generally requiring the landlord’s prior written consent. Section 365(d)(3) also addresses timely performance of post-petition obligations under nonresidential real property leases until assumption or rejection. LII text of Section 365
Here’s what this often means in practice:
- Lease decisions can arrive faster than management expects
- Post-petition rent obligations can create immediate cash pressure
- Store closings or site exits may involve surrender, cleanup, and dispute issues
- Landlord negotiations often begin before the petition date, not after
For multi-location businesses, this is rarely a minor administrative task. It is often one of the core drivers of filing strategy.
5. Identify Assignment Issues Before They Become Sale Problems
Some businesses file bankruptcy to reorganize. Others file to sell assets as a going concern. In either path, assignability matters.
Section 365 contains rules that can, in some circumstances, limit the effect of anti-assignment provisions and permit assignment if the contract is assumed and adequate assurance is provided. But not every agreement is freely assignable, and some categories — especially where personal performance, special regulatory issues, financing accommodations, or nonbankruptcy law are involved — may present serious obstacles. 11 U.S.C. § 365(c) and (f)
That means a pre-filing review often asks:
- Can this agreement be assigned?
- Is counterparty consent likely to be disputed?
- Does the contract involve personal services?
- Is there a government approval or licensing issue?
- Is the agreement tied to industry regulation?
- Would a buyer actually want it?
- Is the value of a sale dependent on keeping this contract in place?
If the answer to any of those questions is unclear, an attorney may want to analyze the agreement well before a filing date. Surprises here can change the economics of a sale process.
6. Look For Hidden Termination And Default Triggers
Some agreements include language that appears to let the other side terminate upon insolvency, receivership, or bankruptcy. These are often called ipso facto clauses.
In many situations, bankruptcy law limits enforcement of contract provisions that modify or terminate rights solely because of insolvency or the bankruptcy filing. Section 365 contains several provisions dealing with those restrictions, although exceptions and factual disputes can still matter. 11 U.S.C. § 365(e)
Even so, preparation is rarely just about spotting a clause and declaring it irrelevant. Counterparties sometimes argue that termination happened before the filing, or that independent defaults justify termination, or that the agreement is not assumable for other reasons. The timeline can become everything.
That is one reason counsel often asks for:
- Default notices
- Reservation-of-rights letters
- Termination notices
- Email communications about breach
- Amendment history
- Evidence of waiver or course of dealing
A contract that was still salvageable on Monday may look very different if a valid termination took effect before the petition was filed.
7. Review Personal Guarantees And Cross-Default Language
Many small and midsize businesses are surprised to learn that a business bankruptcy may not fully resolve the owner’s personal exposure.
Commercial leases, equipment agreements, merchant contracts, and supply arrangements often include:
- Personal guarantees
- Confessions of judgment in some jurisdictions
- Cross-default provisions tied to other agreements
- Cross-collateralization provisions
- Affiliate liability language
These provisions can reshape the leverage around a filing. A landlord may have a claim against both the company and the guarantor. A default under one agreement may trigger rights under another. A lender relationship may be intertwined with key vendor or equipment arrangements.
Subchapter V has created another planning lane for eligible small business debtors, and the U.S. Trustee Program provides a current overview of that framework. Even there, leases and contracts remain central because the debtor still has to evaluate the economics and legal treatment of ongoing obligations. U.S. Trustee Program Subchapter V overview
8. Check Whether The Contract Is Even Still Executory
Not every agreement gets treated as an executory contract just because it is labeled “contract” in the file cabinet.
That legal question can be technical. Sometimes one side has already fully performed. Sometimes termination occurred before filing. Sometimes the agreement is really a financing arrangement dressed up as a lease. Sometimes state law or the contract structure changes the analysis.
This classification issue matters because the business’s options may differ depending on what the agreement actually is. If management assumes every document can be assumed, rejected, or assigned the same way, the strategy can drift off course early.
In more complex situations, a bankruptcy attorney may coordinate with litigation counsel, real estate counsel, or industry-specific counsel to map out the character of the agreement before the petition date.
9. Match The Contract Strategy To The Bankruptcy Strategy
Contract planning works best when it is tied to the business’s actual end goal.
If The Business Is Trying To Reorganize
The focus often turns to which agreements are indispensable, which cure amounts are realistic, and whether post-petition performance can be maintained.
If The Business Is Planning A Going-Concern Sale
The focus may shift toward which contracts a buyer wants, whether assignment can be achieved, and how to preserve enterprise value during marketing.
If The Business Is Preparing For An Orderly Wind-Down
The analysis may center on rejection exposure, surrender obligations, and whether early negotiations can reduce administrative costs.
This is where pre-filing decision-making becomes especially important. If you are also weighing whether to keep or exit specific agreements, our article on figuring out which deals to keep and which to walk away from in bankruptcy can help frame that analysis at a high level.
10. Prepare The Documents Counsel Will Ask For
Businesses often lose time and money in the first weeks of a case because critical paperwork is missing. Before filing, it can help to gather:
- Every signed lease and amendment
- Every signed contract and amendment
- Guaranties
- Side letters
- Notices of default or termination
- Rent ledgers
- Accounts payable aging for contract counterparties
- Insurance certificates
- Security deposit and letter-of-credit documentation
- Assignment and consent correspondence
- Litigation pleadings involving the agreement
- Internal summary of why the agreement matters
This document set often becomes the backbone for first-day motions, assumption/rejection planning, sale preparation, budgeting, and negotiations with landlords and vendors.
It may also reduce the risk of the business making avoidable errors. If you want a practical companion piece, we also cover common contract and lease mistakes that can make a bankruptcy case more expensive.
11. Understand That Local Rules And Procedure Also Matter
The Bankruptcy Code provides the broad statutory framework, but procedure often comes from the Federal Rules of Bankruptcy Procedure and local bankruptcy court rules.
The federal judiciary’s current rules materials include the national bankruptcy rules, and Rule 6006 addresses procedure related to assumption, rejection, and assignment of executory contracts and unexpired leases. Current Rules of Practice and Procedure, Rule 6006 reference
In practical terms, filing strategy may be influenced by:
- Motion procedures
- Notice requirements
- Objection deadlines
- Form of cure notices
- Sale scheduling
- Local judge preferences
- District-specific local rules
That procedural layer is one reason businesses often look for counsel with documented experience handling similar chapter 11 matters in the relevant court.
12. Know When Early Legal Analysis Can Change The Outcome
Pre-filing lease and contract analysis often affects more than paperwork. It can shape whether a filing is viable at all.
For example:
- A business may believe it can keep operating, but post-petition lease obligations make the cash burn unsustainable.
- Management may expect a going-concern sale, but assignment restrictions reduce what a buyer can actually acquire.
- A company may think a location can be saved, but cure costs turn out to be far higher than expected.
- Owners may assume the filing contains their exposure, but personal guarantees remain a major issue.
An attorney might help evaluate not only the bankruptcy law questions, but also the sequence: negotiate first, file first, sell first, or wind down outside of court. In many cases, timing becomes a major source of leverage or risk.
Common Questions Businesses Ask Before Filing
Can Bankruptcy Cancel Any Contract The Business No Longer Wants?
Not exactly. In general terms, bankruptcy may allow rejection of certain executory contracts or unexpired leases, but the analysis depends on the type of agreement, its status on the petition date, court approval, and resulting claims.
Can A Business Keep A Lease If It Is Behind On Payments?
Sometimes, but assumption often involves curing defaults and providing adequate assurance of future performance under Section 365. The numbers and timing can matter a lot.
Can A Landlord Terminate The Lease Just Because The Business Filed?
Bankruptcy law often limits termination based solely on insolvency or the filing itself, but disputes can arise about prepetition termination, independent defaults, and timing.
Does This Only Matter In Large Chapter 11 Cases?
No. Small businesses often feel these issues even more sharply because a single lease, vendor contract, or franchise agreement may drive most of the company’s value.
Is This Mostly About Retail Store Leases?
Not at all. Technology subscriptions, distributor agreements, logistics contracts, equipment arrangements, and customer contracts can be just as important.
If you are looking for a broader FAQ-style overview, you may also find it helpful to read our piece on the questions business owners often ask about contracts and leases in bankruptcy.
A Short Summary Before You Talk To Counsel
Preparing for lease and contract issues before filing a business bankruptcy often starts with a simple but powerful question: Which agreements actually matter, and what will it cost to keep, assign, or exit them?
A thoughtful pre-filing review can uncover cure exposure, assignment problems, guarantee risk, timing deadlines, and hidden defaults before those issues turn into emergency motions and expensive surprises. It also gives bankruptcy counsel more room to build a filing strategy around the real economics of the business rather than assumptions.
If your company’s future may depend on one location, one vendor, one customer agreement, or one portfolio of ongoing contracts, the fit between your case and your attorney’s prior work can make a meaningful difference. Visit ReferU.AI to get matched with an attorney who has demonstrable experience in cases like yours — for free.
