List contract clauses conditioned on insolvency or a bankruptcy case
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- From each contract made before the case began, quote any clause that confers a right because of insolvency, financial condition, commencement of a case, or appointment of a trustee or a custodian, with the clause number. List contracts made after commencement in a separate list. Do not say the right is unenforceable.
- What the lawyer must review
- You decide which subsection applies, and you do not treat a listed clause as already stayed. 11 U.S.C. § 365(e)(1) says that, notwithstanding a provision in an executory contract or unexpired lease or in applicable law, an executory contract or unexpired lease of the debtor may not be terminated or modified, and any right or obligation under it may not be terminated or modified, at any time after commencement of the case solely because of a provision conditioned on the insolvency or financial condition of the debtor at any time before closing of the case, the commencement of a case under title 11, or the appointment of or taking possession by a trustee in a case under title 11 or a custodian before such commencement. Section 365(e)(2) says paragraph (1) does not apply if applicable law excuses a party other than the debtor from accepting performance from or rendering performance to the trustee or an assignee, whether or not the contract prohibits assignment, and that party does not consent to assumption or assignment, or if the contract is a contract to make a loan, or to extend other debt financing or financial accommodations, to or for the benefit of the debtor, or to issue a security of the debtor. A separate rule is 11 U.S.C. § 541(c)(1). Except as paragraph (2) provides, an interest of the debtor in property becomes property of the estate under section 541(a)(1), (a)(2), or (a)(5) notwithstanding a provision in an agreement, transfer instrument, or applicable nonbankruptcy law that restricts or conditions transfer by the debtor, or that is conditioned on insolvency, financial condition, commencement of a case, or appointment of or taking possession by a trustee or a custodian before commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor's interest in property. Section 541(c)(2) says a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under title 11. Section 365(e) is not section 541(c). The automatic stay was not used for this list.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes preparing preliminary structure or wording. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Calculate operative dates independently from the current rule and actual triggering event. Check exceptions and record the verified deadline.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.