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possession, or was obtaining rent for the premises, in deciding whether rejection (and thus termination of the expense of administration) would be effective as of the date of the court's order approving rejection, or an earlier point in time, such as the later of the date the rejection motion was filed or the premises vacated.
In a case where the debtor subleased the premises and was receiving sublease rent, the Delaware court did not make the rejection retroactive to the petition date, instead allowing the landlord an expense of administration under § 365(d)(3) until the landlord obtained possession of the premises through agreement with the sublessees.
The provisions of the Code concerning executory contracts may intersect with § 553 and the doctrine of setoff. Where a debtor is in default or owes money under an executory contract before filing bankruptcy, the non-debtor party will seek to offset sums due to the debtor under the contract against the debtor's obligations. In a Tenth Circuit case, the debtors were farmers in their second bankruptcy case, a chapter 12. In their first bankruptcy filing, the debtors had lost their rights to certain government payments when the contract with the government was not assumed. Accordingly, they were not entitled to payments for two years. In their second bankruptcy filing, under chapter 12, the debtors sought and the government agreed that the debtors could essentially re-enter the government program and obtain contractual payments on a going-forward basis. The government sought to offset pre-petition sums due on a defaulted loan against the contract payments. The Tenth Circuit affirmed the Bankruptcy Appellate Panel's rejection of the offset because, while the government's claim arose pre-petition, its debt to the debtors arose post-petition when the debtors again. entered into the contract. The parties' reservation of rights with respect to
