One of the things you have to declare in Chapter 7 is any current executory (not fully performed) leases - either as the landlord or the tenant - as well as your other contracts. If these are month-to-month leases, there's no problem. The tenant could move out with 30 days notice. But it's a different story when you've signed tenants, especially commercial tenants, to fixed-term leases.
I know of a case in the Santa Rosa, Calif. Bankruptcy Court where the debtors had signed two commercial tenants to above-market-rate leases with a commitment to three years, total. In that case, the trustee claimed the leases as property of BK estate. Total value of the leases was over $100,000 but the matter will likely settle for substantially less than that.
Often, the trustee won't want residential leases -- they come with liability! But commercial leases are far less risky. Here's a good summary of the issue from the University of Minnesota:
The trustee may assume or reject executory contracts and leases of the debtor. An executory contract is an agreement under which the obligations of both parties to the contract are unperformed. Common examples of such contracts in a farm setting include equipment leases and real property leases. Certain farm program contracts, such as Conservation Reserve Program contracts, are also executory contracts.If the trustee elects to assume an executory contract, he must either cure any defaults in the contract or provide the other party to the contract with adequate assurances that he will cure the defaults. In a Chapter 7 case, the trustee has 60 days from the filing of the bankruptcy petition to make a determination as to whether such contracts or leases should be assumed. A contract for deed in which the debtor is the buyer has been determined by the courts not to constitute an executory contract under the Bankruptcy Code. Therefore, the trustee need not determine whether to assume such contracts or cure all defaults under such contracts immediately.
