When some or all of a debtor’s obligations under an existing contract or lease have yet to be performed, the debtor (or the bankruptcy trustee) can decide whether to agree to perform or refuse to perform its obligations under the contract or lease. If the debtor agrees to perform its remaining obligations it has assumed responsibility for the contract or lease. This is called an assumption of the contract or lease. And if the debtor or bankruptcy trustee refuses to perform the remaining obligations under the contract or lease it is a rejection of the contract or lease.

In Connecticut, as in other states, when a debtor files for bankruptcy, they have the option to either assume or reject executory contracts and unexpired leases. An executory contract is one in which both parties still have significant performance remaining. If the debtor or the bankruptcy trustee decides to assume the contract or lease, they agree to continue performing their obligations under the agreement, which often involves curing any defaults and providing adequate assurance of future performance. Conversely, if they reject the contract or lease, they are indicating their refusal to perform their remaining obligations, and the contract is considered breached as of the date of the filing of the bankruptcy petition. The non-debtor party to the contract then has a claim for damages resulting from the breach. This process is governed by federal bankruptcy law, specifically under 11 U.S.C. § 365, and is applicable in Connecticut through the federal bankruptcy courts that have jurisdiction over such matters in the state.