Can a Debtor Enforce an Ipso Facto Clause?

Generally, bankruptcy courts do not enforce ipso facto clauses. Defaults covered under ipso facto clauses are usually impossible or impracticable to cure—a debtor cannot readily cure insolvency, the filing of a bankruptcy case, or an assignment for the benefit of creditors.

Are ipso facto clauses enforceable?

This provision of the Bankruptcy Code generally makes ipso facto clauses for executory contracts unenforceable. When read in combination, these bankruptcy statutes invalidate ipso facto clauses unless a bankruptcy court approves the contract termination or until the bankruptcy proceedings are finalized.

What is ipso facto clause?

An ipso facto clause is a contractual provision that allows one party to the contract to terminate or modify the operation of the contract upon the occurrence of a specified insolvency related event (such as the appointment of an administrator, receiver or liquidator) in respect of another party.