Chances are that you have never thought about your gym membership, your apartment lease or your cell phone contract as an executory contract.  But you need to be familiar with the term before you file for bankruptcy. When you file for bankruptcy, you have the opportunity to reject your obligations under executory contracts and reset your monthly budget.  How much easier would your life be if you no longer had to pay an expensive monthly cell phone bill?  And how great would it be if you did not have to pay an early termination fee?  If you file for chapter 7 bankruptcy, you can do exactly that.  It is important to start looking at your monthly expenses and try and find as many executory contracts as possible before you file for bankruptcy.  That way, you can reject the contracts that are weighing down your monthly budget and maximize your fresh start.  But how can you spot an executory contract?

An executory contract is a contract where both parties still have important obligations to one another.  In other words, the contract is still being performed.  For example, let’s say you still have a year left on your cell phone contract when you file for bankruptcy.  That contract is executory because neither party has completed performance.  You still have the obligation to make your monthly payments and the provider still has the obligation to provide service.  Some common examples of executory contracts are apartment leases, car leases, cell phone contracts, and gym memberships.  And when you file for chapter 7, you can drop any of these obligations you no longer want to keep.

When you file for chapter 7 bankruptcy, you have the option of assuming or rejecting your executory contracts.  It is important to talk with your bankruptcy attorney about your executory contracts so you can decide whether you want to assume or reject them. In a Chapter 7  case, executory contracts must be assumed or rejected within 60 days after filing the bankruptcy petition.  If you do not agree to perform the contract within 60 days, the contract is assumed to be rejected.  The great thing about rejecting an executory contract is that typically, any damages from rejecting the contract are discharged with your bankruptcy.  So if you reject your cell phone contract, your early termination fee is discharged as unsecured debt. The flip side is that you might have an executory contract you want to assume.  So be sure to tell your attorney if there is a contract you want to assume.

This is too big of a topic to cover everything in a single blog post.  But the important thing to take from this post is talk to your attorney about any contract you think is an executory contract.  A skilled bankruptcy attorney  will walk you through your options with your executory contracts.  But your attorney will not know about your executory contracts unless you disclose them.  Disclose everything so you can be sure to get the most out of your bankruptcy.  Chapter 7 bankruptcy not only can eliminate your debt, it can also get you out of some of your future obligations.  By planning ahead and talking to your attorney about your executory contracts, you can give  yourself the fresh start you need to get back on the right financial track.

Topeka Bankruptcy Attorney