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Renegotiate your lease with Chapter 11 business bankruptcy

On Behalf of | May 26, 2021 | Commercial Real Estate

As a business owner, there is nothing tougher than having to make the decision to go into bankruptcy. Even though Chapter 11 bankruptcy allows you to restructure your debts and keep your doors open, it may seem like a failure. Set aside that feeling, because the reality is that you may keep your business open, and help it thrive, by going through this bankruptcy.

Debt workout and bankruptcy services help you continue to stay open while protecting your business from creditors. They may also help you renegotiate your lease. How? By reassuming the debt on terms that you agree with.

Managing your unexpired lease

Your business may have an unexpired commercial lease that you need to renegotiate to be able to pay for the space. As the debtor, you have two options. One is to reject the lease. The other is to assume the lease again and to continue paying.

This gives you leverage. You may be able to negotiate away fees and penalties from missing rent payments. You may get the landlord to allow several months without payments in exchange for higher payments following the bankruptcy (when it’s assumed you’ll have better cash flow). You may also be able to negotiate a longer-term lease at a lower rate or to discuss leasing less space, so that you can lower the lease’s cost in the future. Even topics like subleasing may come up, which could help you renegotiate the lease in a way that helps your business get back on track.

Renegotiating a commercial lease is an art, and it’s something your bankruptcy attorney will be able to discuss with you as you navigate your Chapter 11 bankruptcy. With this bankruptcy, you can reject leases you no longer need and reassume those that are necessary to keep your business functioning. This is an excellent option for those with high overhead costs who believe they can lower them or find ways to cut down on those costs by downsizing. It’s a landlord’s decision to agree or not agree to the newly negotiated lease, but for most businesses and landlords, it is worth taking the time to find a solution.