Highway 55 Restaurants Bankruptcy: Landlord Rights

Little Mint, Inc., a North Carolina company that operates restaurants under the name “Highway 55,” filed for Chapter 11 bankruptcy on December 31, 2024, in the U.S. Bankruptcy Court for the Eastern District of North Carolina. This is likely to create much uncertainty for the landlords who own the buildings where these restaurants are located. In fact, Highway 55 has already filed a motion to reject (terminate early) some 24 leases, and more closings and rejections are likely to follow.

Collecting Rent from a Bankrupt Tenant:

Once a tenant files for bankruptcy, a lease becomes subject to the rules of bankruptcy, the tenant becomes largely untouchable, and you “get in line” according to your priority as a creditor. Bankruptcy triggers certain legal rights and obligations not included in the lease itself that a landlord must navigate to minimize loss.

Eligibility Issues in Chapter 13

For a debtor to be eligible to commence a Chapter 13 case, certain statutory requirements must be adhered to.  Section 109 of the Bankruptcy Code provides these requirements, which are as follows: Only “individuals” have access to Chapter 13 as a means of financial rehabilitation.  11 U.S.C. §109(e).  Eligibility for other chapters of bankruptcy is not as limited; for example, …