Bankruptcy Court Rules Chapter 13 Debtors Must Assume or Reject Leases in 120 Days

Friday, June 10, 2016

In a recent decision from the Bankruptcy Court for the District of Maine, In re Cho, the Court ruled that 11 U.S.C. § 365(d)(4)(A) applies to debtors in Chapter 13 cases. In this case, the debtors operated a dry cleaning business and had an unexpired lease with a creditor. The creditor moved for relief from the automatic stay. The debtors subsequently filed their Chapter 13 plan, 188 days after filing, and attempted to assume the lease with the creditor. The creditor objected to the debtors’ plan. After a discussion of the issue of assumption/rejection in the context of Chapter 13 case, the Court stated that the language regarding the assumption of nonresidential leases was “clear, unambiguous and commanding,” and held that it applied in Chapter 13 cases. The Court granted relief from stay to the creditor. In dealing with landlords and tenants in the bankruptcy context, counsel should be consulted early on concerning the leasehold rights and responsibilities of both debtors and creditors. (Hyegu & Jen Cho - Chapter 13 - 15-20638 - , Bankr. D. Me. 2016).

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