How Bankruptcy Shakes Up New York Business Deals

One day, everything's running smoothly. The next, a key client or business partner files for bankruptcy—and suddenly, you're left wondering what happens to the contract you depended on. Will you still get paid? Can you enforce the terms? Is your agreement about to vanish into thin air?

You’re not alone in asking those questions. At Horn Wright, LLP, we know exactly how fast bankruptcy can throw your world off balance. But we also know how to bring it back under control. Our commercial bankruptcy & creditor litigation attorneys help New Yorkers facing contract confusion during bankruptcy get clarity, take action, and protect what’s theirs. We’ll show you what bankruptcy means for your contracts, how to defend your rights, and what you can do—starting now—to avoid being left in the dust. 

Crushed Contracts & Legal Crossroads: The Truth About Executory Agreements

What Makes a Contract “Executory” Under New York Bankruptcy Law?

Let’s keep it simple. If both sides still have stuff to do in a contract, it’s probably “executory.” That could mean you’re still delivering goods, or they’re still making monthly payments. Either way, the deal isn’t done.

In New York, you’ll find executory contracts everywhere. Think leases, service agreements, or licensing deals. They’re common. But when bankruptcy enters the picture, they suddenly become incredibly high stakes.

• A gym lease where rent is still due every month: The landlord still offers access to the space, and the tenant still owes rent. If the tenant files for bankruptcy, they might walk away entirely or push to keep the lease. You’ll need to know how to respond.
• A software license that requires ongoing support: The tech company is on the hook for keeping systems running, while the customer makes monthly payments. When that company files for Chapter 11, clients are left wondering if their tools will still work tomorrow.
• A supply contract where goods are delivered over time: You’re sending out shipments on schedule, expecting to get paid. But now the buyer’s bankrupt. Can you stop? Can you get paid? These are tough questions with big consequences.

Why These Contracts Matter More Than You Think

When bankruptcy hits, these aren’t just minor paperwork problems. These contracts might be the very thing keeping your business afloat—or draining it dry. The debtor gets a powerful choice. They can “assume” the contract and stick with it, or “reject” it and walk away. That choice directly impacts you.

If you’re on the other end of the deal, your revenue, inventory, or business continuity might hang in the balance. That’s why it’s so important to understand where you stand and act quickly.

Don’t Let Bankruptcy Erase You: Fight for What’s Yours

How Bankruptcy Affects Your Role as a Creditor or Contract Party

You’ve probably asked yourself, “What happens now?” Maybe you’re owed money. Maybe you’ve kept your end of the deal, but they haven’t. When the other party files for bankruptcy, the playing field changes.

The automatic stay goes into effect. That means you can’t just sue them or cut off services. But your rights aren’t gone. Far from it. You now become a creditor in the bankruptcy case, and your contract becomes part of a very real legal tug-of-war.

If they want to keep the contract, they’ll need to fix any missed payments and prove they can meet future terms. If they reject it, you could be entitled to compensation. But only if you make your move.

Steps You Can Take Now to Protect Your Interests

Don’t wait around. Timing is everything here. There’s no magic fix, but there are smart steps you can take to make sure you’re not left behind:

• Review all active contracts with the party in bankruptcy: Know which ones still require performance on both sides. These are the ones that matter most in court.
• Gather written records, payment histories, and any prior defaults: Emails, invoices, statements. Keep them handy. They can help you prove you’re owed.
• Monitor the bankruptcy docket for motion filings related to your agreement: You can track these online. Look out for motions to assume or reject your contract.
• File proof of claim if you're owed money: This is your ticket into the case. Miss it and you could miss out on any recovery.

If a contract is core to your business, you may want to speak up directly in the case. You have that right. Using it could make all the difference.

Get the Legal Backup You Deserve—Talk to Horn Wright, LLP Today

If you're worried about what bankruptcy means for your contracts in New York, don't try to figure it out alone. Horn Wright, LLP, has helped business owners, landlords, freelancers, and professionals statewide understand what comes next and how to protect what matters. We’ve worked with restaurant owners in the Bronx, commercial landlords in Albany, and creatives in Brooklyn. No matter the industry or size of your agreement, our attorneys take the time to understand your situation and deliver a strategy that works in the real world—not just on paper.

Book a confidential consultation with Horn Wright, LLP, today and take the first step toward protecting your contracts, your rights, and your peace of mind.