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the offset issue meant that the government could not assert that the post-petition action of reentering the contract program amounted to assumption of the pre-petition liability.
Rejection of a lease is treated as a breach occurring immediately before the bankruptcy petition. Courts increasingly distinguish between rejection as a breach, rather than termination of a contract or lease. In a chapter 7 case, the trustee ordinarily does not assume the debtor's unexpired residential lease, which is deemed rejected by operation of law under § 365(d)(1) if not assumed within 60 days after the order for relief. Usually a landlord in such a situation is entitled to relief from the stay to terminate the debtor's possession and evict the tenant unless the tenant is paying the rent and performing the other obligations due under the lease. A governmental landlord, on the other hand, may be faced with the limitation of Bankruptcy Code § 525(a), the bankruptcy antidiscrimination statute, which among other things, prohibits a governmental unit from withholding benefits under a license, permit or similar grant to a person or to discriminate against a person who has been a debtor solely because of the bankruptcy filing, insolvency, or failure to pay a dischargeable debt. The Second Circuit held in Stoltz, that § 525(a) applied to the debtor's rights in federally subsidized public housing, so that a landlord could not evict the tenant solely because of her failure to pay discharged rent. The tenant remains liable for post-petition rent, which is not dischargeable in chapter 7, and the public housing authority may require payment of post petition rent as a condition of public housing benefits.
The debtor was a franchisee under an agreement providing for a non-competition period after termination of the franchise agreement. A number of courts have treated franchise agreements as
