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Bankruptcy Beats Bad Leases

Commercial tenants will be taking the brunt of our current economic uncertainty.  Long term leases that were signed in good times can be the stone that sinks a business in bad times.  Landlords are reluctant to renegotiate leases and finding a new tenant to replace the current tenant is a long shot at best.  Chapter 11 bankruptcy gives a tenant the power to toss that stone out of the business and stay afloat.         

In a chapter 11 bankruptcy, a business may: 1. Reject leases on unprofitable locations with a cap on damages; 2. Assume leases on profitable locations with a one-year payment plan for past-due rent assume; and 3. Assign leases to a third party