Assume Meaning

In bankruptcy, to assume means to agree to continue performing obligations under an executory contract or unexpired lease, subject to the rules of the Bankruptcy Code and court approval where required. When a debtor assumes a contract, the estate keeps the agreement in force instead of rejecting it.

The term most often appears in disputes involving a Contract or lease in bankruptcy proceedings.

Assume Explained

Section 365 of the Bankruptcy Code provides that a trustee or debtor in possession may assume or reject an executory contract or unexpired lease, subject to statutory conditions and court approval. Bankruptcy Rule 6006 supplies the procedure for motions to assume, reject, or assign those agreements.

The Term Assume in Different Legal Contexts

In bankruptcy cases, assumption matters when the debtor wants to preserve the benefits of an existing contract or lease. Depending on the circumstances, assumption may require curing defaults and meeting additional legal requirements before the court approves it.

The term can also appear in reorganization plans and other bankruptcy proceedings where parties seek approval to keep a contract or lease in effect.

Common Misconceptions About the Meaning of Assume

A common misconception is that assumption happens automatically whenever a debtor wants to keep a contract. In reality, bankruptcy law imposes procedural and substantive requirements.

Another misconception is that assuming a contract only means keeping the benefits. Assumption generally means continuing the obligations as well, unless the law or court order provides otherwise.