How Are Unexpired Contracts Treated In Bankruptcy?
Nearly everything you agree to in your adult life requires you to sign a contract. When you buy a house, or a car, you are asked to sign a contract. The terminology may differ, as most home loans are referred to as mortgages and car loans can be called notes, but the end result is the same. A contract is a legally binding agreement whereby the parties to the agreement agree to certain terms. When purchases are the subject of a contract, the agreement consists of making payments until the purchase price has been fully paid. But there are other types of agreements that are also reduced to a writing, such as an apartment lease or an agreement for an extended warranty on your car. These types of agreements are typically month to month, or have an expiration date after a certain time. So if you need to file bankruptcy, but still owe under one of these types of agreements, you need to know how the terms are handled in your case.
An unexpired contract can be given special treatment if you file for bankruptcy. Here is a breakdown of your two main options for treatment of an unexpired contract:
• You may decide to assume the lease/unexpired contract and by doing so you agree to continue the payments as provided for in the original agreement. So if you bought an extended warranty on your car and agree to pay a certain amount for that protection, over several months, you will still have to pay that amount in order to keep the warranty.
• You can decide to reject the unexpired contract, and relive yourself of the obligation to make the remaining payments. If you decide to go this route, the lender may object to your decision. If that happens you will need to be prepared to present legal argument in your favor and obtain Court approval of your rejection of the unexpired contract.
In order to determine which option is best for you, let us help. We can take a look at your agreements and give you advice on what will work best for your case and also for your future finances.
For answers to your questions about debt and what you need to do about certain contracts, contact us at www.DsouzaLegalGroup.com.