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Can my commercial landlord/lessor cancel my lease just because I filed for
bankruptcy?

Although generally the answer is no, there is a situation that comes up in a commercial context that is different than in a residential context. Suppose you file for bankruptcy and you own a business that has a valuable commercial lease as one of its assets. The Bankruptcy Trustee that is appointed in bankruptcy to represent your general unsecured creditors will try to raise money by “liquidating” your assets. The Trustee could do this by selling the business outright, or it could sell your business “in pieces” so to speak.

 

If your Bankruptcy Trustee attempts to “sell” (assign) your valuable lease to a third party (in exchange for payment) then your commercial landlord (or other type of commercial lessor) CAN terminate your lease if it chooses to, by the authority of 11 U.S. Code § 365 (Executory contracts and unexpired leases) which basically states that your Bankruptcy Trustee cannot “force” your commercial lessor to deal with some other party in your place and stead.

Although the Trustee in Bankruptcy can try to negotiate with your commercial landlord/lessor to allow an “assumption and assignment” of your lease, it is a voluntary act by your landlord/lessor – it cannot be forced upon him.

NOTE: If the lease was already in default at the time your bankruptcy is filed, your Landlord/Lessor will probably obtain permission from the Bankruptcy Court to cancel your lease UNLESS your Bankruptcy Trustee (or you if you wish to keep the lease and the Trustee has no interest in assuming it) provide(s) “adequate assurances” to the Lessor that the defaults will be promptly cured along with any pecuniary losses suffered by the Lessor.

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Disclaimer: The Law Offices of Michael E. Zapin is a debt relief agency and we help our clients file for bankruptcy relief.
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The materials and discussions on this website are for informational purposes only and not intended to be legal advice to you. Most of the information on this website is based on Florida law. Laws are not static, they are fluid. Legislatures periodically change dollar values in laws relevant to bankruptcy. Though we strive to remain current on the law, always check primary sources for the most recent values or developments.  Laws in your home state may vary. Contact a competent local professional for actual legal advice or ask us for a referral.