Which section governs true lease treatment in bankruptcy?

Which section governs true lease treatment in bankruptcy?

• A. 365(d)
• B. 363
• C. 506
• D. 704

Answer: (A)

In bankruptcy, how a lease of property is handled when the debtor continues or ends that agreement is governed by the provision that specifically covers unexpired leases and the debtor’s options to assume or reject them, including cure and adequate assurance requirements. This framework is what determines true lease treatment: the lessor retains ownership, payments are treated as rent, and the debtor must cure defaults and provide adequate assurance if they want to keep the lease, with clear procedures and timelines for continuation or rejection. The other sections deal with different aspects—such as post-petition sales or use of estate property, valuation of collateral, or the trustee’s duties—without addressing the specific mechanics of unexpired leases and their cure/assumption in bankruptcy.

In bankruptcy, how a lease of property is handled when the debtor continues or ends that agreement is governed by the provision that specifically covers unexpired leases and the debtor’s options to assume or reject them, including cure and adequate assurance requirements. This framework is what determines true lease treatment: the lessor retains ownership, payments are treated as rent, and the debtor must cure defaults and provide adequate assurance if they want to keep the lease, with clear procedures and timelines for continuation or rejection. The other sections deal with different aspects—such as post-petition sales or use of estate property, valuation of collateral, or the trustee’s duties—without addressing the specific mechanics of unexpired leases and their cure/assumption in bankruptcy.