The bankruptcy petition includes a section for executory contracts and unexpired leases. I have been asked by several debtors what is an executory contract and unexpired lease? The simple answer is that an executory contract is an agreement between two parties where neither party has fulfilled its obligations under the contract. An unexpired lease is an example of an executory contract. Although the obvious items are vehicle and apartment leases, any existing contract or lease must be listed. The most typical types of contracts and leases aside from vehicle and apartment leases are cellular phone contracts, internet and cable contracts, gym memberships, rent-to-own contracts, etc. Once listed, a debtor must complete a statement of intention for each and identify whether the lease or contract will be assumed or rejected. If a contract is rejected, the debtor cannot gain from the contract, but the debtor is released from any burdens imposed by the contract. If a lease is rejected, a debtor is relieved of the obligation to pay, however the debtor must return the leasehold.
Obviously, creditors prefer that contracts are assumed and that the pre-existing agreement remains in place after bankruptcy.