Just as there are different types of bankruptcies, there are different kinds of debt in bankruptcy, such as an executory contract. An executory contract is one that has not yet been fully executed or performed, that is, all parties to the contract have yet to fulfill their obligations.
Service contracts, residential leases and car leases are examples of executory contracts.
Other types of executory contracts include:
- Business leases or rental agreements
- Business contracts
- Labor contracts (including unions)
- Time-share contracts or leases
- Real estate contracts
- Personal property leases, such as business equipment
- Leases of real estate (surface and underground) for mining or harvesting purposes
- Future homeowners’ association fee requirements
- Boat docking leases or agreements
- Insurance contracts
Executory contracts may be handled differently in different types of bankruptcy cases, though they are generally classified as unsecured debt.
In Chapter 7 and 13 bankruptcy cases, the Trustee has discretion over the resolution of an executory contract. The Trustee may decide to terminate, assume, or continue to pay the lease or contract. Should the contract be terminated, the remaining monies owed are generally discharged as unsecured debt, with the creditor receiving no further or additional payment.
In Chapter 11 cases, the Trustee has the option to reject an executory contract. However, in a Chapter 11, unsecured creditors also are granted the right to negotiate jointly for payment via the reorganization plan.
For executory contracts in bankruptcy, there are special considerations for contracts concerning intellectual property, which includes such matters as:
- Copyrights
- Patents
- Trademarks
- Proprietary information/trade secrets
Every contract is unique, from the parties involved to the conditions contained in the contract. Whatever the type of contract, when a bankruptcy is involved, the advice of an experienced attorney is crucial in pursuing a successful resolution.
Working with an experienced, knowledgeable Arizona creditor’s attorney can help tremendously when evaluating a bankruptcy filing. If you would like more information about executory contracts in bankruptcy, creditors’ rights, or if you need assistance from an attorney, contact Windtberg & Zdancewicz to schedule an initial consultation.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation in all collection matters. We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance with your collection matters, please contact us at (480) 584-5660.