Cure Claim
A Cure Claim is the amount asserted or determined to be required to cure qualifying defaults under an executory contract or unexpired lease that a debtor seeks to assume under Bankruptcy Code Section 365.
Cure is the price of keeping a defaulted contract
Bankruptcy gives the debtor substantial flexibility to assume valuable executory contracts.
That flexibility generally does not let the estate retain the contract while simply ignoring qualifying prepetition defaults.
Section 365(b) supplies the core requirement
The debtor must cure or provide adequate assurance of prompt cure, address qualifying pecuniary losses and provide adequate assurance of future performance.
The exact cure obligation depends on the contract, default type and applicable law.
Cure disputes can continue without delaying the entire plan
Current 2026 plans provide procedures for disputed cure amounts and can allow the plan to become effective while the parties continue litigating or settling the cure issue.
The debtor may retain flexibility to alter whether the contract is ultimately assumed after the dispute is resolved.
Cure and rejection damages point in opposite directions
Assumption requires the estate to cure qualifying defaults and carry the contract forward.
Rejection generally converts the counterparty's damages into a bankruptcy claim instead of requiring future performance.
Cure should be compared with the contract's forward value
Assume a lease requires a $2 million cure payment. The lease is below market and is expected to generate $8 million of economic value for the business or buyer.
Paying the cure can still make sense.
Now assume the same $2 million cure relates to a contract producing only $500,000 of incremental value and that comparable replacement arrangements are available. Rejection or renegotiation may be economically stronger.
This is why cure diligence should not ask only:
“What is the cure amount?”
It should ask:
“What value is preserved by paying that cure?”
In a Section 363 transaction, that comparison can determine which contracts the buyer designates for assumption and which obligations remain with the estate.
Common mistakes
Treating cure as only unpaid invoices Other qualifying defaults or pecuniary losses can matter.
Assuming the counterparty's asserted amount is final Cure Claims can be disputed.
Ignoring cure in a Section 363 purchase-price model Assumed contracts can require substantial additional cash.
Example
A debtor wants to assume a warehouse lease. The landlord asserts $900,000 of unpaid rent and charges as the Cure Claim, while the debtor calculates $650,000. The parties settle at $725,000, which is paid under the plan as part of the assumption process.
Example
A debtor wants to assume a warehouse lease. The landlord asserts $900,000 of unpaid rent and charges as the Cure Claim, while the debtor calculates $650,000. The parties settle at $725,000, which is paid under the plan as part of the assumption process.
Professional note
Cure amounts affect both sale price and restructuring liquidity. A contract can be valuable enough to assume but still destroy transaction economics if the cure obligation is much larger than expected.
Related terms
- Executory Contract
An Executory Contract in bankruptcy is a contract subject to treatment under Bankruptcy Code Section 365 that the trustee or debtor in possession may generally assume or reject, subject to statutory conditions, exceptions and court approval.
- Assumption and Assignment
Assumption and Assignment is the Bankruptcy Code Section 365 process through which a debtor first assumes an executory contract or unexpired lease and then transfers it to an assignee, subject to statutory requirements including cure obligations where applicable and adequate assurance of future performance.
- Rejection Damages Claim
A Rejection Damages Claim is a bankruptcy claim for damages resulting from rejection of an executory contract or unexpired lease, with Bankruptcy Code Sections 365(g) and 502(g) generally treating an unassumed contract's rejection as a prepetition breach for claim purposes.
Related ROIStreet guides
- What Is the Rule of 55?
The Rule of 55 is an informal name for a federal exception to the 10% additional tax on certain early retirement-plan distributions. It can apply when a worker separates from the employer maintaining a qualified plan in or after the calendar year the worker reaches age 55. This guide explains the age test, eligible plans, IRA differences, taxes, rollovers and special public-safety rules.
- Stocks vs. Bonds: A Practical Comparison
Stocks represent ownership in companies; bonds generally represent lending to an issuer. This comparison explains how the two differ in return sources, volatility, income, maturity, priority, credit risk and liquidity.
- What Is a 401(k) Recordkeeper?
A 401(k) recordkeeper maintains the participant-level ledger: contributions, investments, gains and losses, fees, loans, distributions and account balances. The recordkeeping role is distinct from holding plan assets, writing the plan document or serving as the legal plan administrator, even when one financial company bundles several of those services.
- What Compensation Counts for a 401(k)?
There is no single universal 401(k) compensation number. A plan can use different definitions for deferrals, matching, profit sharing and testing, while statutory definitions govern limits such as Sections 401(a)(17), 414(s) and 415.