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sixty days. In re CEC Entm't, Inc., The Automatic Stays Stops All Actions landlords to enforce, collect, or recover
625 B.R. 344, 352–53 (Bankr. S.D. Against the Tenant 11 USC 362 a claim from the debtor are stopped by
Tex. 2020). At the commencement of bankruptcy, the automatic stay. Further, any act to
In the Summer of 2020, in J.C. the landlord should be aware that obtain possession of leased space or
Penny Co., Inc., the debtor also request- the filing triggers the automatic stay, exercise control over premises of the
ed a rental payment extension arising which bars all actions taken by credi- estate stays. In other words, a landlord
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within sixty days of the petition date. tors against the tenant, also known as could face penalties for enforcing, col-
Effectively, requesting an additional the debtor. Under Section 362 of the lecting, or recovering past due rents or
sixty days to pay rent. Nevertheless, Bankruptcy Code, any attempts by the attempting to evict a bankrupt tenant.
after the first extension, the Court did
not allow any further extensions on
rental payment performance.

Pre-bankruptcy Communications
Decrease Problems
Both the debtors in Neiman Marcus
and Belk contacted creditors months
ahead of the bankruptcy filings. In
Neiman Marcus, months before filing,
the debtor contacted the landlords to
negotiate payments and obtain rent
concessions. The pre-bankruptcy
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communication resulted in savings of
millions of dollars for the debtor and
the landlords.
To date, the fastest bankruptcy is
Belk, which reorganized in just 24
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hours. In preparation for its prepack-
aged filing, the debtor negotiated
with 90,000 creditors including
landlords. Prior negotiation efforts
protected not only the debtors but
also the landlords.

Letters of Credit Increase the Landlord’s
Security
Letters of Credit may protect a
landlord from a tenant’s default.
Letters of Credit provide independent
security for tenant rent. It can also
provide greater security than a guar-
anty or a security deposit, because
it is a source of additional collateral.
Created under Article 5 of the Texas
Business and Commerce Code, a third
party, such as a bank, issues a letter
of credit for the benefit of the tenant
to the landlord. Letters of Credit are
often noted in asset and purchase
agreements. Letters of credit require
at least three parties. One being the
financing entity, usually a bank that
issues the letters of credit. Next, the
tenant or the party is required to have
a letter of credit. Lastly, there is the
landlord, or the party requiring the
tenant(s) to have letters of credit.

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