Section 365(d) of the Bankruptcy Code requires the debtor-tenant to satisfy all the terms under the lease during the post petition period until the tenant either rejects the lease, or assumes and assigns it to a third-party. The landlord’s claim for unpaid rent receives “administrative claim” status, which is a higher priority of claim than many of the other claims against the debtor. Creditors holding an administrative claim against the debtor will receive payment on their claims before “unsecured creditors,” to the extent funds are available.
Should the debtor-tenant fail to pay the rent as provided under the lease, the landlord should file a motion for payment of post-petition rent with the bankruptcy court and/or a motion for relief from automatic stay. The rent motion in some instances can be heard within thirty to sixty days from the date in which it was filed. However, if an evidentiary hearing is needed to resolve issues pertaining to the administrative rent claim, the motion could require several months before the court issues a decision.
Instead of seeking payment of rent, landlords may file a motion for relief from the automatic stay. With this alternative, the landlord seeks an order from the court allowing the landlord to enforce its rights under the lease due to the tenant’s breach (such as evicting the defaulting tenant).
Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP. Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at firstname.lastname@example.org.