Bankruptcy Risks for Personal Property Lessors

Lexis Practice Advisor

This practice note discusses the risks to lessors of personal property when the lessee files a petition for relief under the Bankruptcy Code.

Equipment leases generally qualify as executory contracts under Section 365 of the Bankruptcy Code. As such, these leases of personal property may be assumed or rejected by a debtor-in-possession or trustee, unless the transaction evidenced by the documents and labeled lease is found by a court to be a disguised loan transaction. See sample clause regarding Equipment Lease Clause (Lessee Bankruptcy).

This practice note discusses the requirements for assuming and rejecting personal property leases, the risk that the lease will be a disguised loan transaction, and related issues as follows:

  • Performance prior to Assumption and Rejection of Executory Contracts
  • Assumption
  • Rejection
  • Equipment Lease Restructuring
  • Lease Recharacterization

To read the full practice note, please click here.

“Bankruptcy Risks for Personal Property Lessors,” by Ira L. Herman was published as a Lexis Practice Advisor® Practice Note on February 14, 2020. Reprinted with permission.