The Consequences of Filing in 2026

An executory agreement is one where both sides still have significant commitments left to carry out. To put it simply, neither party has fully completed what they concurred to do. Typical examples of executory agreements in a service context include: Equipment leases Supply and vendor arrangements Service contracts Software licenses Commercial realty leases These are the types of agreements that often end up being crucial when a company declare personal bankruptcy.

365, when an organization apply for bankruptcy, it gets the right to either presume or reject its executory agreements. That decision has major effects for everybody included. Assuming a contract means the organization consents to continue following it moving forward. Declining a contract suggests business ignores it.

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The other celebration to the agreement does not get to choose whether the agreement is presumed or rejected. The goal is to keep the service alive while reorganizing its debts. That is why there is much more flexibility in how agreements are treated in Chapter 11 than in a liquidation.

Under 11 U.S.C. 365, the decision can usually be made at any point before the court verifies the reorganization plan. The other party to the contract can ask the court to set a due date if the unpredictability is triggering them damage. If the company chooses to assume an agreement in Chapter 11, it must do so in complete.

365(b), this implies treating any missed payments or defaults, compensating the other party for any losses caused by those defaults, and providing sufficient assurance that it can carry out going forward.

Restoring Your Score After a 2026 Filing

Under 11 U.S.C. 365(d)( 1 ), in a Chapter 7 case, the trustee has 60 days from the date of filing to choose whether to presume an executory agreement. If the trustee does not presume the agreement within that window, it is immediately considered declined.

When a contract is declined in Chapter 7, the other party is once again entrusted to a general unsecured claim against the insolvency estate. In a liquidation, those claims are often paid really little or nothing at all, depending on just how much is left after secured lenders are paid. Many service agreements consist of stipulations that state the contract immediately ends or can be terminated if one celebration files for personal bankruptcy.

Under 11 U.S.C. 365(e), ipso facto stipulations are usually not enforceable in personal bankruptcy. An agreement can not just be terminated just since an insolvency was submitted.

Lawyer Vicky Fealy is Board-Certified in Consumer Bankruptcy Law by The Texas Board of Legal Specialization. She has actually helped thousands of individuals and companies with debt relief, and she is all set to direct you through every step. Contact us to schedule a complimentary assessment with our Galveston, TX personal bankruptcy lawyer today.

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(Post Updated Jan. 6 and 8, 2026) This short article notes federal and state consumer law changes set up to go into effect or end during the duration from December 1, 2025, through January 1, 2027. Other customer law modifications will be enacted in 2026 and will go into impact in 2026; this post lists changes whose effective dates have already been set up as of December 31, 2025.

Strategies to Halt Wage Garnishment

Important changes to Bankruptcy Guideline 3002.1 and six associated new insolvency forms went into effect on December 1, 2025. The modifications safeguard property owners who use chapter 13 insolvencies to stave off foreclosures and keep themselves present on their home mortgages, offering them details required to effectively complete a remedy strategy and emerge from chapter 13 without surprise, undisclosed charges, or payment amounts due.

New Guideline 8006(g) will clarify that any celebration to an appeal might submit a demand that a court of appeals license a direct appeal. 26 U.S.C. 108(a) offers that certain forgiveness on a home mortgage loan is ruled out income for income tax functions, however the Qualified Principal House Insolvency Exclusion from Income expired at the end of 2025.