Choosing Between Chapter 7 and Chapter 13 in 2026

An executory agreement is one where both sides still have substantial commitments left to carry out. In other words, neither celebration has actually totally completed what they concurred to do. Common examples of executory agreements in an organization context include: Equipment leases Supply and supplier arrangements Service agreements Software licenses Commercial realty leases These are the kinds of agreements that typically become important when a service apply for insolvency.

, when a service files for insolvency, it acquires the right to either assume or decline its executory agreements. Assuming an agreement means the service concurs to continue following it going forward.

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The other celebration to the agreement does not get to choose whether the agreement is assumed or rejected. Their rights depend entirely on which course the debtor takes. Chapter 11 is a reorganization bankruptcy. The objective is to keep business alive while restructuring its financial obligations. That is why there is far more flexibility in how contracts are dealt with in Chapter 11 than in a liquidation.

Under 11 U.S.C. 365, the choice can normally be made at any point before the court verifies the reorganization strategy. The other party to the agreement can ask the court to set a due date if the unpredictability is triggering them harm. If the company decides to presume a contract in Chapter 11, it should do so in complete.

365(b), this indicates treating any missed payments or defaults, compensating the other celebration for any losses triggered by those defaults, and offering appropriate assurance that it can carry out moving forward. Business can not choose the parts of an agreement it likes while rejecting the rest. Chapter 7 is a liquidation personal bankruptcy.

Navigating Chapter 7 and 13 Statutes for 2026

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

When a contract is turned down in Chapter 7, the other celebration is once again entrusted to a basic unsecured claim versus the bankruptcy estate. In a liquidation, those claims are frequently paid really little or absolutely nothing at all, depending on just how much is left after protected financial institutions are paid. Numerous business contracts consist of stipulations that state the contract automatically ends or can be terminated if one party declare bankruptcy.

Under 11 U.S.C. 365(e), ipso facto provisions are typically not enforceable in insolvency. An agreement can not merely be terminated simply due to the fact that a bankruptcy was submitted.

Attorney Vicky Fealy is Board-Certified in Consumer Personal Bankruptcy Law by The Texas Board of Legal Specialization. She has assisted countless individuals and organizations with financial obligation relief, and she is all set to direct you through every step. Call to schedule a complimentary assessment with our Galveston, TX personal bankruptcy attorney today.

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

Choosing Between Chapter 7 and Chapter 13

NCLC motivates readers to send (to) additional consumer law changes reliable in 2026, particularly changes in state customer legislation. NCLC will include suitable submissions to this post. Important changes to Insolvency Guideline 3002.1 and 6 related brand-new bankruptcy types went into result on December 1, 2025. The modifications safeguard homeowners who utilize chapter 13 bankruptcies to ward off foreclosures and keep themselves present on their mortgages, offering them details needed to successfully complete a remedy plan and emerge from chapter 13 without surprise, concealed costs, or payment amounts due.

New Guideline 8006(g) will clarify that any party to an appeal might submit a request that a court of appeals authorize a direct appeal. 26 U.S.C. 108(a) supplies that certain forgiveness on a home loan is not thought about earnings for income tax purposes, but the Qualified Principal Home Insolvency Exemption from Income ended at the end of 2025.