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the lease, then the landlord can file a after the commencement of the case.” Read the Confirmation Order
claim for the rent that is owed. Section 11 U.S.C. § 503(b)(1)(A). These costs After filing bankruptcy, the
365(a) treats rejected leases as breach- and expenses include post-petition debtor will submit a Plan of Reorga-
es of a lease before bankruptcy; claims rent. These costs are necessary to the nization (“Plan”) and a Disclosure
are normally considered pre-petition preservation of the estate; and are Statement. The debtor’s prospective
claims for rent. The rejection amount paid before unsecured claims, such as Plan should address which leases
of the claim is capped by Section proofs of claim that deal with pre-peti- it will assume or reject, or when
502(b)(6)(b). It allows for the greater tion rejected leases' rental expenses. creditors can expect the debtor to
amount of rent owed for one year or
15% of the rent not to exceed 3 years
following the filing of the bankrupt-
cy. Additionally, most courts man-
date that the landlord subtract the
security deposit from the calculation.

Retroactive Rejection
Landlords may claim post-petition
rent as an administrative claim. This EMPLOYER
would mean the landlord would at BENEFIT SERVICES
least be paid in full for the rent it
was owed between the date the bank-
ruptcy case was filed and the date
the lease was rejected. It is becoming
more common for debtors to ask that
a lease be rejected retroactively to the
bankruptcy filing date. Additionally,
debtors have also been moving more
quickly to reject leases. PLAN PAYROLL BENEFIT
By rejecting the abandoned leases ADMINISTRATON MANAGEMENT PACKAGE
on the petition date, the debtor is Assistance and research Get your employees MARKETING
relieved of any post-petition adminis- to keep you informed paid quickly so you Document
trative expense claims by landlords. and in compliance with can get back to doing administration of
state and federal laws.
what your company
401(k) and 403(b)
The debtor's quick rejection also does best. including employee
means he/she does not have to pay enrollment assistance.
the landlord his/her monthly rent
under Section 365(d)(3). Unfortu-
nately, when that occurs, landlords
have little to no recourse.
However, the longer a debtor
waits in a bankruptcy case, the more
unlikely it will be that a bankruptcy
court will grant this retroactive
relief. Moreover, in cases where the CLAIMS HUMAN BENEFITS
debtor is actively using the space MANAGEMENT RESOURCES EDUCATION AND
and that use is either generating When a claim is CONSULTING CONSULTING
income or providing a benefit to made, we assist in the Develop policies and Craft a competitive

the estate, it will be hard-pressed process, from the first procedures, address employee benefits plan
to recruit and retain
recruiting strategies,
to convince a court that retroactive filing of the claim to its develop job descriptions. valuable employees.
resolution.
rejection is advisable.
1
What are Administrative
Claims, exactly? PUTTING ALL THE HEALTHCARE
Section 503(b)(1)(A) of the Bank- BENEFIT PIECES TOGETHER
ruptcy Code, states that adminis- OFFICE ONLINE
trative status of claims is allowed 713-647-9700 www.corebenefits.net
for “the actual, necessary costs and
expenses of preserving the estate...

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