When filing for Chapter 7 Bankruptcy protection, a Debtor is required to file a statement of intention indicating how he or she will treat each secured Claim. See 11 USC 521(a)(2). Secured claims typically include automobiles and homes, however, a debtor must also state an intention as to executory contracts and unexpired leases such as cellular phone contracts or other service contracts. When a debtor elects to retain the service or continue the contract, an election to assume the lease or contract must be submitted to the Bankruptcy Court. Naturally, if the debtor wishes to walk away from the contract or lease he or she would elect to reject the contract.

An assumption of a lease is the equivalent of a reaffirmation agreement without certain protections. In a Chapter 7 filing, the debtor’s election to assume or reject the lease is subject to court approval. If no election is made, the lease is deemed rejected. Moreover, unlike 11 USC 524(c)(4), which allows a debtor to rescind a reaffirmation agreement within 60 days, the Bankruptcy Code contains no provision for rejecting previously assumed leases. Consequently, before a debtor elects to assume an existing Executory Contract or lease, the debtor should make certain it is in their best financial interest.