A basic precept of bankruptcy is that estate assets may not be used for payment of general claims except pursuant to a confirmed plan of reorganization or under court-approved trustee disbursements. An important exception to this rule exists for unexpired leases and executory (i.e., mutually unperformed) contracts, on the theory that estate funds must be spent in order to preserve a corresponding (or more valuable) return. This circumstance most commonly arises in the context of real property leases. 

    We are intimately familiar with all of the competing rights, remedies and tensions at play between landlords and tenants in bankruptcy, including challenges and defenses to landlords' liens, the assertion of administrative claims and the compelled assumption or rejection of the underlying lease. Pete Zemanian recently represented a secured creditor (derivatively through the bankruptcy estate) in district court and Fourth Circuit appeals of a cutting-edge case involving the debtor's assumption and assignment of a lease in derogation of a restrictive use provision. See LaSalle Nat'l Trust, N.A. v. Trak Auto Corp., 288 B.R. 114 (E.D. Va. 2003), rev'd, 367 F.3d 238 (4th Cir. 2004).

Many of the same issues and complications arise in the context of personal property leases and other executory contracts. Pete Zemanian has handled motions for the compelled assumption of environmental remediation agreements, the adjustment of rights between a franchisor and franchisee, and the declaration of "true lease" status for equipment leases challenged as disguised security agreements. He also successfully handled the novel issues raised in the trial and appeal of the non-assumable nature of certain partnership rights in bankruptcy. See In re Catron, 158 B.R. 824 (Bankr. E.D. Va. 1992), aff'd, 158 B.R. 629 (E.D. Va. 1993), aff'd, 25 F.3d 1038 (4th Cir. 1994).