When a business enters bankruptcy, some of the most urgent questions involve the deals that are still alive: the store lease, the equipment rental, the software license, the supply agreement, the franchise agreement, or the long-term services contract that keeps operations moving. Bankruptcy law gives debtors and trustees a structured way to decide which of those ongoing obligations stay in place and which do not.
That process usually centers on assumption, rejection, cure costs, and adequate assurance of future performance under 11 U.S.C. § 365. In general terms, assumption is the choice to keep a contract or lease in place, rejection is the choice to stop performing it as an estate obligation, and cure costs are the amounts that may have to be paid or addressed before assumption can be approved. The practical question behind all of it is business continuity: which agreements are essential to keeping the company alive, stabilizing value, or supporting a sale or reorganization? U.S. Courts materials on Chapter 11 note that litigation over executory contracts and unexpired leases is a common feature of reorganization cases.
Bankruptcy activity has also been rising. According to the Administrative Office of the U.S. Courts, business filings increased to 24,039 in fiscal year 2025, and total Chapter 11 filings were 8,937 nationwide. That backdrop helps explain why lease and contract strategy remains a central issue for distressed companies, landlords, vendors, and counterparties alike. U.S. Courts data
In this post, you’ll learn what executory contracts and unexpired leases are, how assumption and rejection work, why cure costs can become a major fight, and how these decisions often shape business continuity in Chapter 11 and other bankruptcy cases. For a broader foundation, it may help to start with this overview of bankruptcy and restructuring options, then circle back here for the contract-specific issues.
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The Bankruptcy Code does not supply a detailed all-purpose definition of “executory contract,” which is one reason disputes arise. Courts often describe it as a contract where material obligations remain on both sides. Bankruptcy court guidance commonly gives examples like leases, rent-to-own arrangements, and other ongoing agreements where both parties still owe performance. Northern District of Iowa Bankruptcy Court FAQ
Typical examples can include:
Not every agreement a business signed before filing will qualify. A contract that has already been fully performed by one side may fall outside this framework, and some rights may be governed by other Bankruptcy Code provisions or by nonbankruptcy law. That is one reason businesses often spend time early in a case identifying what really belongs on Schedule G and what does not. If you want the basics in plainer language, this primer on ongoing deals in bankruptcy gives a useful starting point.
Under Section 365(a), a trustee or debtor in possession, with court approval, may assume or reject an executory contract or unexpired lease. In practical terms, assumption is the decision to keep the agreement and bind the estate to it going forward.