Svenhard’s Swedish Bakery v. Bakery and Confectionery Union and Industry International Pension Fund

This case concerns the interpretation of a bankruptcy statute. Subject to the bankruptcy court’s approval, debtors in Chapter 11 bankruptcy may generally assume executory contracts that predate the bankruptcy petition. 11 U.S.C. § 365(a). If a contract is assumed, the debtor must cure any defaults under the agreement, and the agreement will survive the bankruptcy. One exception to the general rule permitting assumption is that a debtor may not assume “a contract to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor[.]” 11 U.S.C. § 365(c)(2). The question presented by this case is whether Section 365(c)(2) precludes Chapter 11 debtors from assuming pre-petition contracts that require no extension of new credit, money, property, or financing of any kind to the debtor post-bankruptcy.