Mechanism 60
Assumption of an unexpired lease
How does a bankrupt business keep the location it operates from?
By assuming the lease — curing the defaults, compensating the counterparty for actual pecuniary loss, and providing adequate assurance of future performance. For a restaurant, a clinic or a retailer the lease is the business, and the assumption motion is the reorganisation. It also runs on the harshest clock in the Code.
By John P. Henry · 11 U.S.C. § 365 · Reviewed 2026-08-02
The authority
[I]f there has been a default in an unexpired lease of the debtor, the trustee may not assume such … lease unless, at the time of assumption of such … lease, the trustee — (A) cures, or provides adequate assurance that the trustee will promptly cure, such default …11 U.S.C. § 365(b)(1)
11 U.S.C. § 365
When it applies
Any Chapter 11 whose value is tied to premises. In a small-business case it is usually the single most contested motion, because the landlord knows the debtor cannot move.
How it is proved up
- Calendar § 365(d)(4) the day the case is filed. For non-residential real property the lease is deemed rejected and must be immediately surrendered at the earlier of 120 days after the order for relief and the date of plan confirmation.
- Seek the ninety-day extension before the 120 days expire. The statute permits it only prior to expiration, and any further extension requires the lessor’s prior written consent.
- Quantify the cure precisely and be ready to fund it. A cure the debtor cannot pay is not a cure.
- Build the adequate-assurance record on the business, not on optimism — post-petition operating results, the projections, the guaranty if there is one.
- Keep paying post-petition rent under § 365(d)(3) while the motion is pending. Falling behind on that is the fastest route to losing the motion.
What defeats it
- The 120-day deadline, which is self-executing. Miss it and the lease is deemed rejected with immediate surrender, with no motion required from the lessor.
- A lease that terminated before the petition, which is not property of the estate and cannot be assumed.
- An unfundable cure amount.
- A landlord that can show the assurance of future performance is not adequate on the numbers.
Where I have used it
In re ARGDOWNTOWN, LLC · United States Bankruptcy Court for the Northern District of Texas. Motion to assume an unexpired lease, contested by the counterparty, with two hearing resets before the case resolved by agreement and was dismissed on an agreed order. The lease was the reason the case was filed, which is the ordinary shape of a single-location Chapter 11.
Questions
How long does a Chapter 11 debtor have to assume a commercial lease?
The earlier of 120 days after the order for relief and the date of plan confirmation, under 11 U.S.C. § 365(d)(4)(A). The court may extend that by ninety days for cause, but only on a motion made before the initial period expires.
What happens if the deadline to assume a lease is missed?
The lease is deemed rejected and the debtor must immediately surrender the premises. It is self-executing — the landlord need not move for anything.
What is adequate assurance of future performance?
A showing that the debtor will be able to perform the lease going forward. Courts look to operating results, projections, the debtor’s post-petition payment history and any guaranty or deposit.