The coronavirus pandemic has been particularly cruel to brick-and-mortar retail establishments. As rising infection rates force municipalities to roll back reopening plans, retail and hospitality businesses that rely on in-person sales to generate revenue are finding it impossible to manage fixed costs, especially rent. Many have sought shelter in chapter 11, only to discover that even the federal bankruptcy laws cannot always solve their rent problems.

What Does the Chapter 11 Tenant Owe its Landlord During the Bankruptcy Case?

Trying to collect money from someone who cannot or will not pay you is frustrating. That old chestnut about throwing good money after bad comes to mind. Placing an individual or firm (your “debtor”) into bankruptcy is a powerful remedy to secure payment. But it should not be undertaken without careful thought and planning.

A creditor should ask the following six questions before placing a recalcitrant debtor into bankruptcy.

Who Are You?

In this series, we look at how various payment rights are treated in bankruptcy. A summary like this could not possibly address every right that might arise in any given bankruptcy case. We have omitted several of the Bankruptcy Code’s more esoteric legal protections and exceptions that arise in specific kinds of bankruptcy cases. When bankruptcy strikes, creditors should always consult a bankruptcy lawyer to understand what actions they need to take to preserve their rights and maximize their recovery.

The Basic Concept of a “Claim”

In this series, we look at how various payment rights are treated in bankruptcy. A summary like this could not possibly address every right that might arise in any given bankruptcy case. We have omitted several of the Bankruptcy Code’s more esoteric legal protections and exceptions that arise in specific kinds of bankruptcy cases. When bankruptcy strikes, creditors should always consult a bankruptcy lawyer to understand what actions they need to take to preserve their rights and maximize their recovery.

The Basic Concept of a “Claim”

In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.

In this series, we look at how various payment rights are treated in bankruptcy. A summary like this could not possibly address every right that might arise in any given bankruptcy case. We have omitted several of the Bankruptcy Code’s more esoteric legal protections and exceptions that arise in specific kinds of bankruptcy cases. When bankruptcy strikes, creditors should always consult a bankruptcy lawyer to understand what actions they need to take to preserve their rights and maximize their recovery.

The Basic Concept of a “Claim”

In this series, we look at how various payment rights are treated in bankruptcy. A summary like this could not possibly address every right that might arise in any given bankruptcy case. We have omitted several of the Bankruptcy Code’s more esoteric legal protections and exceptions that arise in specific kinds of bankruptcy cases. When bankruptcy strikes, creditors should always consult a bankruptcy lawyer to understand what actions they need to take to preserve their rights and maximize their recovery.

The Basic Concept of a “Claim”

Even in the halcyon days pre-coronavirus, a typical small business could not operate for more than two weeks without incoming revenue. In a matter of months, social distancing and mass unemployment having dramatically reduced consumer spending and companies are surviving by cutting energy usage, adjusting inventory purchases, and drawing on Paycheck Protection Program loans to backstop employee wages. Rent, however, is one expense that remains immutable.

As the coronavirus (COVID-19) pandemic continues to shake global markets, it is likely that more companies will need to restructure to address liquidity constraints, to right-size their balance sheets, or to implement operational restructurings. In addition to a potential surge in restructurings, the spread of COVID-19 is already having pronounced impacts on companies planning or pursuing restructurings, and further market turmoil may cause even broader changes to the restructuring marketplace.

Potential Increase in Restructuring Activity

The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”