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2021 Stroock Bankruptcy Guide

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103 Thus, Section 365(c) prohibits a trustee from assuming or assigning an executory contract if "applicable law excuses a party . . . from accepting performance from . . . an entity other than the debtor or the debtor-in-possession," whereas Section 365(f) states that notwithstanding applicable law that restricts or conditions assignment of an executory contract, the trustee may assign such contract. To rectify this incongruence, courts have utilized two approaches in determining whether an executory contract can be assumed. One approach applies the hypothetical test, which presumes that the trustee intends to assign the contract even if in reality it does not, and then bars assumption of the executory contract if applicable law would prohibit assignment. See Cinicola v. Scharffenberger, 248 F.3d 110, 127 n.19 (3d Cir. 2001). The second approach applies the actual test, which bars assumption only when the trustee actually intends to assign the executory contract and applicable law prohibits such an assignment. See Summit Inv. & Dev. Corp. v. Leroux, 69 F.3d 608, 613-14 (1st Cir. 1995). e. Miscellaneous In a case filed under Chapter 7 of the Bankruptcy Code, the trustee must assume or reject an executory contract or unexpired lease of residential real property or personal property within sixty days after the order for relief (or within such additional time granted by the court), or the contract or lease will be deemed rejected. 11 U.S.C. § 365(d)(1). In a Chapter 9, 11, 12 or 13 case, an executory contract or unexpired lease of residential real property or personal property may be assumed or rejected any time before a plan of reorganization is confirmed. 11 U.S.C. § 365(d)(2). However, in such a case, a party in interest may request that the court establish a shorter time period in which these actions must occur. Id. Furthermore, historically Section 365(d)(4) of the Bankruptcy Code provided that nonresidential real property leases, under which the debtor is the lessee, would be deemed rejected if the lease was not assumed or rejected by the trustee before the earlier of (i) the 120 th day after the date of the order for relief—subject to a one-time extension of

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