mackey_931
Junior Member
What is the name of your state (only U.S. law)? CT
Not sure where to post this, so I am putting it in both the business and personal forums.
My business partner and I own a franchise, which is in our personal names. We lease a space for this business, which is under our LLC, but was personally guaranteed. Last year we filed for Chapter 7 personal bankruptcy, and both the landlord and franchisor were named. After the filing, we continued to operate (for 9 months or so) as a franchisee and continued to pay royalties and rent, although no new contracts with the franchisor or landlord were made or signed. We just told them that we were going to try to continue and they let us.
Our bankruptcy lawyer had assured us that as a result of the bankruptcy, we would have no continuing personal obligations under these contracts so long as no new contracts were signed, and that we could continue to operate if we wanted as long as the franchisor/landlord let us (although they may have the right to revoke the franchise and evict.)
We made a go of it, but can no longer continue to operate and are moving to close the business. Our landlord and franchisor, however, have told us that they have spoken to their lawyer, and that we are legally responsible for the future rent and franchise royalties, post bankruptcy, as outlined in the original lease and franchise agreement, respectively.
Which is correct? In reading about the effect of (Chapter 7) bankruptcy on a commercial lease and a franchise contract, in both instances it seems that while the bankruptcy terminates these contracts, an agreement can be made after the filing to continue the terms of the contracts. As I said, no new or amended contracts were written up and/or signed, but did just the act of continuing to operate as a franchise in the space and paying rent/royalties create a defacto new contract that we are therefore on the hook for post-bankruptcy?
We have been trying to contact our lawyer for a few days, but have not been able to reach him, and we need to know what we are up against ASAP so we can do what we need to do.
Thanks in advance for any advice!
Not sure where to post this, so I am putting it in both the business and personal forums.
My business partner and I own a franchise, which is in our personal names. We lease a space for this business, which is under our LLC, but was personally guaranteed. Last year we filed for Chapter 7 personal bankruptcy, and both the landlord and franchisor were named. After the filing, we continued to operate (for 9 months or so) as a franchisee and continued to pay royalties and rent, although no new contracts with the franchisor or landlord were made or signed. We just told them that we were going to try to continue and they let us.
Our bankruptcy lawyer had assured us that as a result of the bankruptcy, we would have no continuing personal obligations under these contracts so long as no new contracts were signed, and that we could continue to operate if we wanted as long as the franchisor/landlord let us (although they may have the right to revoke the franchise and evict.)
We made a go of it, but can no longer continue to operate and are moving to close the business. Our landlord and franchisor, however, have told us that they have spoken to their lawyer, and that we are legally responsible for the future rent and franchise royalties, post bankruptcy, as outlined in the original lease and franchise agreement, respectively.
Which is correct? In reading about the effect of (Chapter 7) bankruptcy on a commercial lease and a franchise contract, in both instances it seems that while the bankruptcy terminates these contracts, an agreement can be made after the filing to continue the terms of the contracts. As I said, no new or amended contracts were written up and/or signed, but did just the act of continuing to operate as a franchise in the space and paying rent/royalties create a defacto new contract that we are therefore on the hook for post-bankruptcy?
We have been trying to contact our lawyer for a few days, but have not been able to reach him, and we need to know what we are up against ASAP so we can do what we need to do.
Thanks in advance for any advice!