What a commercial tenant’s bankruptcy does to a Washington landlord’s rent collection

Reviewed by Kim Sandher, JD, Washington State Bar No. 42630. Last reviewed September 2026.

October 2026: first publication.

Collection of prepetition rent stops on filing under section 362(a). Rent coming due afterward runs on a statutory clock under section 365. A Washington landlord’s separate lien under RCW 60.72.010 is exposed, because section 545 lets the trustee avoid a statutory lien for rent.

At a glance

• The bankruptcy court for the Western District of Washington has two filing locations, and cases from King, Snohomish, Kitsap, Skagit, Whatcom, Island, San Juan, Clallam and Jefferson counties are filed in Seattle (U.S. Bankruptcy Court, W.D. Wash.).
• The petition operates as a stay, applicable to all entities, of any act to collect, assess, or recover a claim against the debtor that arose before the case (11 U.S.C. 362).
• An unexpired lease of nonresidential real property is deemed rejected, and the property immediately surrendered, if it is not assumed or rejected by the earlier of 120 days after the order for relief or entry of an order confirming a plan (11 U.S.C. 365).
• The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that the lien is for rent, or is a lien of distress for rent (11 U.S.C. 545), which reaches the automatic lien RCW 60.72.010 gives a Washington commercial landlord.
• A lessor’s claim for damages from termination of a real property lease is capped at the rent reserved, without acceleration, for the greater of one year or 15 percent, not to exceed three years, of the remaining term, plus unpaid rent due (11 U.S.C. 502).

What stops the day a commercial tenant files, and where will the case be?

Collection of anything owed before the petition stops on its own, without any order being entered. Which district the case belongs in is a separate federal venue question that does not necessarily follow the location of the leased premises, and within the Western District of Washington the court publishes two filing locations, Seattle and Tacoma.

• Inside this district the court assigns filing locations by county. Cases from Clallam, Island, Jefferson, King, Kitsap, San Juan, Skagit, Snohomish and Whatcom counties are filed in Seattle, and cases from Clark, Cowlitz, Grays Harbor, Lewis, Mason, Pacific, Pierce, Skamania, Thurston and Wahkiakum counties are filed in Tacoma (U.S. Bankruptcy Court, W.D. Wash.). That page allocates filing locations within the district. It does not decide whether this district is the right one for a given tenant.
• Federal law stays the commencement or continuation of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the case, or to recover a claim against the debtor that arose before the case (11 U.S.C. 362).
• Federal law stays any act to obtain possession of property of the estate or of property from the estate, or to exercise control over property of the estate.
• Federal law stays any act to collect, assess, or recover a claim against the debtor that arose before the case.
• The stay does not apply to any act by a lessor under a lease of nonresidential real property that terminated by expiration of its stated term before or during the case, to obtain possession of that property.

Exception: A tenant with a Seattle storefront may properly have its case pending in another district, so confirm the district and the case number before acting on anything. Relief from the stay is available on request of a party in interest, for cause, including the lack of adequate protection of an interest in property, but it takes a motion and an order rather than a judgment call at the property.

According to 11 U.S.C. 362, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved October 2026.

The stay is the part landlords underestimate, because it does not look like an injunction. Nobody serves it and no judge signs it. A good process anticipates problems before they surface, which here means one instruction to the property manager and one to the billing system the day the notice arrives: send no demand letters, change no locks, apply no deposit and take no setoff, and hold any unlawful detainer until counsel has pulled the docket and confirmed what the Code or an existing order allows. The stay itself arises on filing, but whether a violation is willful, and what it costs, turns heavily on what the landlord knew and what it did after it knew. If the tenant is an individual, section 362(k) requires an award of actual damages, including costs and attorneys’ fees, for a willful violation and allows punitive damages in appropriate circumstances. If the tenant is a corporation or LLC, that remedy does not apply under Ninth Circuit law (In re Goodman, 991 F.2d 613 (9th Cir. 1993), applied to section 362(k) in Concretize, Inc. v. Fireshield, Inc. (Bankr. D. Or. 2009)), but the bankruptcy court can still sanction a willful violation through civil contempt.

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Does a tenant in bankruptcy still have to pay rent?

Yes, for rent coming due after the case starts. The trustee must timely perform the obligations of the debtor arising from and after the order for relief under an unexpired lease of nonresidential real property, until the lease is assumed or rejected.

1. The duty is to timely perform all the obligations of the debtor, except those specified in section 365(b)(2), arising from and after the order for relief, notwithstanding section 503(b)(1) (11 U.S.C. 365).
2. The court may extend, for cause, the time for performance of an obligation arising within 60 days after the date of the order for relief. The statute then says the time for performance shall not be extended beyond that 60-day period.
3. The obligations carved out by section 365(b)(2) are defaults tied to the insolvency or financial condition of the debtor, the commencement of the case, the appointment of a trustee or custodian, and penalty rate or penalty provisions for nonmonetary defaults.
4. Acceptance of any such performance does not constitute waiver or relinquishment of the lessor’s rights under the lease or under title 11, so taking a partial payment does not give up the rest.
5. The duty runs until the lease is assumed or rejected, which is why the assumption deadline in the next section also fixes the outside date of the payment duty.

Exception: The duty reaches obligations arising from and after the order for relief, so rent that came due before the petition is not part of it and becomes a claim measured under a different section. Timing, amount and remedy can still be litigated, particularly where rent is billed in advance, an obligation straddles the petition date, or a charge falls near rejection.

According to 11 U.S.C. 365, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved September 2026.

This is the provision that separates landlords who do well in these cases from landlords who do not, and the difference is bookkeeping rather than legal theory. The instinct to favor practical solutions over legal theory is usually right here: split the ledger on the petition date, invoice the post-petition months as their own line, and raise a missed one promptly rather than letting three of them accumulate into a number that starts to look like a negotiation. A tenant that cannot make the post-petition payments has told you something about the assumption decision before it makes it.

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How long can a tenant in bankruptcy wait to decide about the lease?

Not indefinitely. An unexpired lease of nonresidential real property is deemed rejected, and the trustee shall immediately surrender the property to the lessor, if it is not assumed or rejected by the earlier of 120 days after the order for relief or the date of entry of an order confirming a plan.

The clock	What 11 U.S.C. 365 sets
Performing post-petition obligations	Timely performance of obligations arising from and after the order for relief, until the lease is assumed or rejected
Extending the time to perform	The court may extend for cause an obligation arising within 60 days after the order for relief, and not beyond that 60-day period
Deciding to assume or reject	The earlier of 120 days after the order for relief, or entry of an order confirming a plan
A first extension of that decision	90 days, on motion of the trustee or lessor for cause, granted prior to the expiration of the 120-day period
Any further extension	Only upon prior written consent of the lessor in each instance
Missing the deadline	The lease is deemed rejected and the trustee shall immediately surrender the property to the lessor
Who exercises these rights	The statute says trustee. In a chapter 11 case the debtor in possession ordinarily exercises those powers

Exception: If the lease was fully terminated under applicable nonbankruptcy law before the order for relief, it generally cannot be assumed or assigned. Whether termination was complete is fact-specific and turns on Washington law, the lease, the notices given, any cure rights, and the posture of any eviction action.

According to 11 U.S.C. 365, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved September 2026.

Landlords tend to read the 120 days as a waiting period, but it is closer to a countdown. The court can grant one 90-day extension, but only on a motion by the trustee or the lessor showing cause, granted before the 120th day. It cannot grant a further one without the lessor’s prior written consent, which is an unusual position to be placed in and an easy one to spend badly. A written consent given for nothing is a free option written on your own building. Give it for a cure, a stipulated payment date, or a shorter deadline, and calendar the 120th day the week the case is filed rather than the week someone calls to ask about it.

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What happens to a Washington landlord’s lien on the tenant’s property?

Washington gives a commercial landlord an automatic lien for up to two months’ rent on personal property the tenant kept on the premises. Federal law then lets the trustee avoid the fixing of a statutory lien to the extent the lien is for rent, which is what that Washington lien is.

• Washington law gives any person to whom rent is due a lien on personal property used or kept on the rented premises by the tenant, with no writing and no recording needed to create it, capped at two months’ rent due (RCW 60.72.010).
• Federal law provides that the trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien is for rent, or is a lien of distress for rent (11 U.S.C. 545).
• The same section reaches a statutory lien that first becomes effective when the case is commenced, when the debtor becomes insolvent, or when the debtor’s financial condition fails to meet a specified standard.
• The Senate report accompanying the section, S. Rep. No. 95-989, states that a lien for rent or of distress for rent is voidable whether it is a statutory lien or a common law lien of distress for rent, and that the trustee may avoid such a lien even if it has been enforced by sale before the case was commenced.
• For a Washington commercial landlord the two provisions meet directly: the lien RCW 60.72.010 creates without any filing is a statutory lien for rent, which is the category section 545 names.

Exception: Section 545 is addressed to statutory liens. Whether a landlord holds something other than a statutory lien, such as a security interest granted in the lease and perfected under Article 9 through a UCC filing, is a separate question that changes this analysis and is worth settling before the tenant is in trouble rather than after.

According to 11 U.S.C. 545, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved October 2026.

This is the pairing that surprises Washington landlords who have read up on the state lien and stopped there. Outside bankruptcy that lien is genuinely useful; it needs no filing, and RCW 60.72.010 makes it paramount to other liens except the ones the statute names for taxes, labor, and mortgages recorded before the tenancy. Inside a case it falls in a category section 545 names for the trustee to avoid: a lien for rent, avoidable because of what it secures rather than how or when it arose. I cannot get into specifics on the files where this has come up, but the pattern is the same: a landlord who thought the restaurant equipment was security learns the claim may be unsecured, and learns it after deciding not to pursue anything else.

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What can a landlord claim once the lease is rejected?

A capped claim. Federal law limits a lessor’s claim for damages resulting from termination of a real property lease to the rent reserved by the lease, without acceleration, for the greater of one year or 15 percent, not to exceed three years, of the remaining term, plus any unpaid rent due.

• The cap is measured following the earlier of the date the petition was filed and the date on which the lessor repossessed, or the lessee surrendered, the leased property (11 U.S.C. 502).
• Rejection of a lease that has not been assumed constitutes a breach immediately before the date of the filing of the petition, which is what makes the resulting damages a prepetition claim (11 U.S.C. 365).
• If the lease is assumed instead and the tenant is in default, the trustee must cure or provide adequate assurance of prompt cure, compensate for actual pecuniary loss from the default, and provide adequate assurance of future performance.
• For a lease in a shopping center, adequate assurance includes the source of rent, that percentage rent will not decline substantially, that the lease provisions on radius, location, use and exclusivity are honored, and that tenant mix or balance is not disrupted.
• Where a lease is assigned, the lessor may require a deposit or other security for performance substantially the same as would have been required of a similar tenant at the initial leasing.

Exception: The cap applies to damages resulting from termination of the lease. Unpaid rent already due on the earlier of those two dates is added to the capped amount rather than absorbed by it.

According to 11 U.S.C. 502, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved September 2026.

The cap is where expectations need adjusting, and the adjustment is usually downward. A landlord holding seven years of remaining term at $9,000 a month is not holding a $756,000 claim. The statute allows the greater of one year of rent or 15 percent of the remaining term and caps that second alternative at three years, so on those figures the cap works out to about $113,400, roughly 15 percent of the remaining rent, plus any unpaid rent already due. The three-year limit only comes into play on terms longer than 20 years. Where a claim actually lands still depends on the lease and on what the court allows, and the goal is always to align the number you are chasing with the number the statute allows.

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Does the filing stop a landlord from pursuing the tenant’s guarantor?

Not automatically. By its terms the stay reaches actions against the debtor and acts against property of the estate, and a guarantor who has not filed is neither.

• The stay provisions are written against the debtor: proceedings against the debtor, enforcement against the debtor or property of the estate, and acts to collect a claim against the debtor (11 U.S.C. 362).
• A guaranty signed by an owner or a parent company is a separate obligation of a separate party, so the tenant’s filing does not by itself resolve it.
• In our experience the guaranty is worth confirming early in these cases, because its value does not move with the capped lease claim.
• Contacting a guarantor who has not filed is generally outside the stay, but a demand that reaches the tenant or its property can violate it, and the court can sanction a willful violation, which is the reason to read the docket before sending anything.
• A guarantor that has filed its own case has its own stay, its own deadlines, and its own claims process.

Exception: A separate bankruptcy filed by the guarantor, an injunction protecting non-debtor parties, a confirmed plan, a settlement, or a case-specific order can each change the general rule. Read the docket and any entered orders before acting on a guaranty.

According to 11 U.S.C. 362, United States Code, 2024 edition, U.S. Government Publishing Office, retrieved October 2026.

This is the question we are asked first and it is the one that most deserves a careful answer rather than a fast one. The general rule is favorable to landlords and the exceptions are real, and I would not tell you which one governs your case without reading the docket. What I can say is that the guaranty is often the part of the file least affected by the tenant’s case. What it can accomplish, however, depends on the document, the defenses available under state law, and whatever the court enters.

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The dates that decide this

Almost everything a landlord can do in a commercial tenant’s bankruptcy is time-bound, and most of the dates run from the order for relief rather than from the day the notice reached the property manager. The 60-day limit, the 120-day deadline, and the 90-day extension are all calendared in the first week of the case, and a landlord who has them on the calendar tends to be the one setting terms when the extension request arrives.

K&S Canon assists Seattle commercial landlords and property owners with lease enforcement and, when a tenant files, proofs of claim, stay relief, and guaranty claims. Call 206-507-4009 or reach the firm through the K&S Canon contact page.