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How leases are treated in Chapter 11 cases

If a person leases land in Tennessee or anywhere else, it may be possible to retain an unexpired lease after filing for Chapter 11 bankruptcy. However, there must be an explicit acceptance of that lease, and the bankruptcy court must then approve of the decision to accept it. This is according to a ruling made by the United States Bankruptcy Court for the Eastern District of North Carolina.

The case involved a man who had filed bankruptcy in April 2018 and had a lease to use farmland that expired in November 2018. Under bankruptcy law, the lessee could have up to 210 days to decide whether to accept or reject the lease. In this case, the lessee did not explicitly accept the lease. Instead, he gave the lessor $21,000, which was what the lessee owed to use the land in 2018. The lessee than argued that the payment represented an acceptance of the lease because the lessor never took steps to reject it.

However, the court ruled that allowing for an implicit acceptance of a lease could create problems in future cases. Generally speaking, parties can object to the acceptance of a lease if they feel that it is not in their best interests to allow it to happen. As a result of the court's ruling, the lessee was required to immediately stop using the land.

Individuals or a business owner may be able to reorganize their debt by filing for bankruptcy. In many cases, both secured and unsecured debts may be part of a restructuring plan that is ultimately approved by the court. Creditors may also need to consent to any sort of repayment plan that a debtor proposes. An attorney might help a debtor structure a plan in way that maximizes its chances for approval.

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