Commercial Lease in Bankruptcy: 6 Deadlines to Assume or Reject Under §365(d)(4)

A tenant that files a Chapter 11 petition acquires the right to decide about its lease, and the same statute that grants the right sets a date on which the decision will be made for it. Under Bankruptcy Code Section 365(d)(4), a lease of nonresidential real property that the debtor has neither assumed nor rejected in time "shall be deemed rejected," and the trustee (in most small cases the business itself, acting as debtor in possession) "shall immediately surrender" the premises to the landlord.

Six dates control that result. Four sit on the court's calendar, one belongs to the landlord, and one expires before the petition is filed at all.

1. Day 120 Runs From the Petition, Not From the Last Unpaid Rent

In a voluntary case the filing itself is the order for relief; Section 301(b) says so in a single sentence. The 120 days in Section 365(d)(4)(A)(i) begin on that day, on the date the petition reaches the clerk, and not on the date the landlord mailed its default notice or the month the tenant stopped paying.

Consider a hypothetical restaurant that files on March 2. Counted the ordinary way, day 120 falls on June 30. If by then the lease has been neither assumed nor rejected (and counsel will want to learn how the local court treats a motion that is filed before that date but decided after it, since Section 365(a) makes every assumption "subject to the court's approval," and the statute does not say whether a pending request is enough), the lease is deemed rejected and the space goes back to the landlord without any motion from the landlord at all.

The word deemed carries the whole paragraph. Nobody decides. The calendar does.

What the restaurant loses on day 121 is seldom the rent obligation, which it may have been glad to shed, and far more often the location itself: the build-out financed in the first year of the lease, the permits issued for that address, the hood and ductwork that cannot be moved without being destroyed, and a customer base that has learned which corner to turn and will not learn a new one on the owner's schedule.

Assumption carries its own price. Section 365(b)(1) conditions the assumption of a lease in default on curing the default or giving adequate assurance of a prompt cure, compensating the landlord for its pecuniary loss, and providing adequate assurance of future performance. A debtor that cannot assemble those three things by day 120 is choosing between the next deadline and the loss of the premises.

2. A Confirmed Plan Can Close the Window Early

The statute runs to "the earlier of" day 120 or "the date of the entry of an order confirming a plan." In a traditional case the plan usually arrives later, so the clause sits unused. Subchapter V is different in pace, since its debtor must file a plan within 90 days of the order for relief under Section 1189(b), and a quick confirmation can arrive before the 120 days have run.

A lease the plan does not assume, on the day the confirmation order is entered, is on the statute's terms rejected by operation of law. The plan schedule should say which leases stay.

3. The Court's Single Extension Belongs to the Period Before Day 120

Section 365(d)(4)(B)(i) allows the court to extend the period "prior to the expiration of the 120-day period, for 90 days on the motion of the trustee or lessor for cause." Three features of that sentence matter more than its length suggests.

The first is timing. The extension is tied to the period before day 120, which is why a careful debtor files the motion weeks ahead and not on day 119, when a crowded docket may decide the matter for it. The second is the requirement of cause, a showing the debtor must make with evidence of why it needs more time (a pending sale of the business, negotiations with the landlord over a rent reduction, an unresolved valuation) and not merely a statement that the decision is hard. The third is quieter. The landlord may bring the motion too, and a landlord that prefers a paying tenant in bankruptcy to an empty storefront and a claim may be the one asking.

One 90-day extension, granted before day 120, for cause. The statute gives the judge no second one to give.

In 2005, Congress rewrote this paragraph. The older text gave the debtor 60 days and let the court fix "such additional time as the court, for cause, within such 60-day period, fixes," and the text placed no ceiling on how much additional time the court could fix. The present structure replaced the open door with a fixed room. On December 27, 2020, in the pandemic relief legislation, Congress substituted 210 for 120 in the same paragraph for two years, and then the number went back.

Whether the old rule was an abuse or a sensible accommodation of businesses that needed a season of sales before deciding is a question that the 2005 amendment settled in the landlord's favor without quite answering.

4. Day 210 Is the Last Date the Court Can Give

Add the 90-day extension to the original 120 days and the outer limit, absent landlord consent, is 210 days from the order for relief. For the hypothetical March 2 filing, that is September 28.

Past that date the court has nothing further to grant. Section 365(d)(4)(B)(ii) permits a later extension "only upon prior written consent of the lessor in each instance," and the phrase does three things in a few words: the consent must come before the extension, it must be written, and it is needed again for every further extension. An email that says the landlord "is fine with more time" is a weak foundation for keeping a store open.

The landlord's signature becomes, in practice, the price of each additional month.

5. Rent Falling Due After the Petition Must Be Paid, and Only 60 Days Can Be Deferred

Separate from the assume or reject clock, Section 365(d)(3) requires the trustee to "timely perform all the obligations of the debtor" that arise under a nonresidential lease once the case begins, and to keep doing so until the lease is assumed or rejected. Rent that comes due after the filing is not a claim to be dealt with in the plan. It is due when the lease says it is due.

The court may, for cause, extend the time to perform obligations arising in the first 60 days of the case, "but the time for performance shall not be extended beyond such 60-day period." So the hypothetical restaurant can ask to defer rent falling due in March and April. It cannot use the statute to defer July. And the landlord's acceptance of those payments, the same subsection adds, "does not constitute waiver" of its rights under the lease.

A tenant that files without the cash to carry post-petition rent has already missed this deadline in every sense except the legal one.

6. The Deadline That Expires Before the Filing

Section 365(c)(3) bars the assumption of a nonresidential lease that "has been terminated under applicable nonbankruptcy law prior to the order for relief." When a lease ends under state law before the petition (because the cure period in a default notice ran out and the landlord exercised its termination right), no later filing restores it. For a lease that ended by the expiration of its stated term, Section 362(b)(10) leaves the landlord's act to obtain possession outside the automatic stay.

When termination occurs is a question of state law and of the lease's own notice and cure provisions. The cure period printed in a default letter can be the most important date in the whole sequence, and it is the one most owners notice last.

Where a Settlement Review Fits and Where It Does Not

Delancey Street negotiates business debt and is not a law firm, so motions to assume, court appearances, and the choice among these dates fall outside its work. A business with a lease worth keeping and a plan to keep it needs bankruptcy counsel, and the six dates above belong on that lawyer's calendar. Where the pressure on rent comes from merchant cash advance debits draining the operating account, Delancey Street offers a free, confidential initial review of that debt, and it brings in separately licensed attorneys where the matter turns legal. The review can sit alongside a bankruptcy consultation. It does not replace one.

The lease was signed for years. The decision to keep it is measured in days, and it belongs to whoever reads the calendar first.