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 Maine, as in other states, when a debtor files for bankruptcy, they or the bankruptcy trustee have the option to assume or reject executory contracts and unexpired leases, as governed by federal bankruptcy law. An executory contract is one in which both parties still have significant performance remaining. If the debtor or trustee assumes the contract or lease, they agree to continue performing the obligations under the agreement, which may include curing any defaults and providing adequate assurance of future performance. Conversely, if they reject the contract or lease, they are effectively breaching it, which can relieve them of future performance obligations but may result in a claim for damages by the non-breaching party. This decision to assume or reject is subject to the approval of the bankruptcy court. The Bankruptcy Code, particularly Section 365, outlines the rules and procedures for the assumption or rejection of executory contracts and unexpired leases. It's important for debtors to consult with an attorney to understand the implications of either decision and to navigate the process in accordance with the law.