How does BAPCPA affect Chapter 11 debtors commercial real estate leases?
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the Chapter 11 debtor has 120 days (plus a 90-day extension) to assume or reject the debtor’s commercial real estate leases. Meeting that deadline may present a challenge to the Chapter 11 debtor, even in average economic conditions. Even as ordinary office space needs may be easy to meet, the logistics of planning such needs in a 120-day time horizon can be daunting. For businesses with special space requirements, the challenge can be far greater. The 120-day limit is thought to affect retail debtors especially because of their heavy reliance on leased space, the integral roles that location, accessibility, and space design play in retail operations, and retailers’ unique liquidity requirements. As a result, the creditors of retail debtors, especially prepetition secured lenders, often have the upper hand in directing the course of retailers’ Chapter 11 cases.
