Troutman Pepper's Creditor’s Rights Toolkit is a series that provides practical insights to help creditors confront the challenges of commercial bankruptcy.

An executory contract is a contract where both sides have material ongoing obligations, where nonperformance by either side would constitute a breach. If the debtor wants to discontinue the benefits or burdens of such a contract, Section 365 of the Bankruptcy Code allows for the debtor to reject the contract. The nondebtor contract party then holds a rejection claim which must be timely asserted in the bankruptcy case.

This article briefly explains the key issues of contract rejection in a bankruptcy case.