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Non-Compete Clauses Survive Chapter 7 Bankruptcy of a Business Owner-Seller

A recent court decision has found that the buyer of a company can enforce a non-compete violation by the seller that occurs after the seller files for bankruptcy and is also fired by the buyer.  The court held that this claim is not discharged in bankruptcy, because it arose after the bankruptcy filing of the seller.  The court further held that the claim was not released in bankruptcy due to any arguably automatic rejection of the buy-sell contract, as this contract was fully performed once the buyer fired the seller, thus rendering it not rejectable.  For more information on planning the purchase or sale of a business, please feel free to reach out to us.   For more detailed information on this court decision, please review the following article.