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 West Virginia, 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. 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 that agreement, which may include curing any defaults and providing adequate assurance of future performance. Conversely, if they reject the contract or lease, they are essentially breaching it, which can relieve the debtor of future performance obligations but may result in a claim for damages by the other party. The decision to assume or reject must be made by the deadline set by the bankruptcy court, and the court must approve the assumption. This process is governed by federal bankruptcy law, specifically under 11 U.S.C. § 365, and is applicable in West Virginia through the federal court system.