Treatment of Franchisee Leases Under 365(d)

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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) substantially revised 11 U.S.C. 365 to significantly limit a debtor's time to assume or reject nonresidential real estate leases. Prior to BAPCPA, upon establishing "cause" a debtor could (and routinely did) extend its time to assume or reject nonresidential real estate leases for extended periods, often through and including the date of confirmation of a reorganization plan.

Under the previous law, a debtor met its burden of cause so long as it (1) could show that it was current on its post-petition rent obligations and (2) provided adequate assurance of future performance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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