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Do you have to pay the rent if your business declares bankruptcy? 

On Behalf of | Mar 3, 2022 | Business Bankruptcy |

When you started your business, you signed a three-year lease. You thought it would be a very successful company and you would address an extension when that term ended.

However, it’s now been two years and you’ve realized your business needs to declare bankruptcy. But you still have a year on that lease. Are you going to have to make those rent payments?

You still do need to pay, though there may be some flexibility

It’s really important to discuss this with your commercial landlord. If you’re currently on the lease at the moment and you still want to stay in the space, you may be able to do it after reorganizing through bankruptcy. You still need to pay the rent and any other costs that you have, and then you can “obtain bankruptcy court approval to assume the lease within 60 days after the date the bankruptcy case was filed.”

If your landlord knows that you’re just reorganizing and it seems clear that you’re going to get your finances in order and begin making money again, they will probably want to keep you in the space, but that’s up to them. There’s no guarantee that they’re going to give you a chance to extend in the future. And, if you start missing rent payments, you are almost certainly going to be evicted.

Bankruptcy can be a way to close your business or a way to simply reorganize it so it works even better than it has in the past. No matter what you choose to do, you can see how important it is to know about all the legal steps you need to take and any obligations that you may have moving forward.