Few words in real estate transactions inspire as much fear as “time is of the essence.” If a closing date or other deadline is time-is-of-the-essence (TOTE), neither party can postpone the closing or extend the deadline without the other party’s consent. So if a buyer is unable to timely close (often because they are unable to obtain financing) and the seller is unwilling to postpone the closing, the buyer may forfeit its security deposit and lose a valuable business opportunity. The consequences for failing to meet a TOTE closing are harsh and seemingly unavoidable.
Not so if the buyer files for bankruptcy before the closing date. The Bankruptcy Code allows a debtor/buyer to extend a TOTE deadline to 60 days after a bankruptcy filing. Under §108(b) of the Bankruptcy Code, if an agreement, court order, or nonbankruptcy law sets a deadline “within which the debtor … may file any pleading, demand, notice, or proof of claim or loss, cure a default, or perform any other similar act, and such period has not expired before the date of the filing of the petition,” then the deadline to file, cure, or perform is extended to 60 days after the filing of the bankruptcy petition. Bankruptcy courts, including those in New York, have held that a TOTE deadline to close (or perform any other act) under a contract may be extended by §108(b) of the Bankruptcy Code to 60 days after the date of the filing of the bankruptcy petition.1
