A commercial lease is considered an "executory contract" in bankruptcy and a debtor is given the right to either "assume" the lease or "reject" the lease. By assuming the lease, the lease's obligations will be binding on the estate. The rejection of the lease is considered to be a prepetition breach of the lease under the Bankruptcy Code.  An assumed lease may be assigned to another party.

The Bankruptcy Code requires a debtor to assume or reject a lease within 120 days of the filing of the bankruptcy case or the lease will be deemed rejected. The time period for assumption or rejection of a lease may be extended by the Bankruptcy Court for cause. The bankruptcy court may only grant one 90 day extension unless the landlord provides a written consent.

The debtor may not assume a lease unless at the time of assumption, it cures any existing defaults or provides for adequate assurance that it will promptly cure the default. The debtor must also compensate the landlord for any actual pecuniary loss and provide for adequate assurances of future performance.