An executory contract is merely an agreement between two parties to perform a future action. For instance, your apartment lease is an executory contract because it obligates you to continue paying rent to your landlord in the future. You must pay afterward, not immediately. And the landlord will accept this payment stream in the future.
However, apartment leases are not the only items included in this category. Other forms of contracts include automobile leases and cell phone contracts. Remember that the cell phone contract requires you to continue making monthly payments for a set period of time in the future.
This contract becomes the property of the bankruptcy estate when you file for bankruptcy. Therefore, the trustee has control over whether or not the contract remains in effect. A rejected executory contract is null and void, with no penalties or early termination fees.
Who has the authority to manage the valid cell phone contact? Section 365(a) of the United States Bankruptcy Code states that the trustee may accept or decline the executory contract, but only if all payments are current at the time the bankruptcy petition is filed. The law only grants this authority to the trustee, not the person who filed for bankruptcy.
What occurs if the trustee fails to act on the cell phone contract? In accordance with Section 365(d)(1) of the U.S. Bankruptcy Code, the contract is deemed declined if the trustee does nothing within 60 days of the case filing date.
What transpires if the contract is rejected? Fundamentally nothing. As long as you continue making payments, your cell phone provider will keep your service active.
After rejection, an early termination of a cell phone contract. You are no longer responsible for any fees and charges if you reject the contract, with the exception of usage and monthly fees while using the phone. Therefore, if you file for Chapter 7 bankruptcy, use the phone for six months after the discharge, and then terminate your contract, the company cannot hold you responsible for early termination fees.
You must include the cell phone provider's name and address on your bankruptcy schedules, along with the contract information. To be safe and ensure that the provider receives appropriate notice, you may wish to include every cell phone company address you can find on your schedules.
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