Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
Assuming that the noncompete is valid and enforceable as currently agreed to, then a bankruptcy will have no effect, because the bankruptcy discharge only relieves the debtor from the personal obligation to pay a debt. It does not relieve the debtor of a personal obligation to act or forebear from action.
Hope this helps.
Terms and Conditions: By your continuing in this conversation with me, or by your clicking “Accept”, you are expressly agreeing to all of the following: (1) our communication is for entertainment purposes only; (2) you are not consulting me in my professional capacity as an attorney; (3) you do not seek to establish an attorney-client relationship with me, nor do I with you; (4) you will not rely on anything I say and you will obtain appropriate legal counsel via a traditional/office consultation with an attorney licensed to practice in the jurisdiction where your legal issue arises (and you may not use our communication to avoid taxpayer penalties imposed by the U.S. Dept. of Treasury); (5) by communicating with me in this public forum you are irrevocably waiving any right to privacy, confidentiality and attorney-client privilege concerning the matters discussed. You further separately declare that any payment made by you is not consideration for this contract, nor offered for any services rendered by me on your behalf, but rather is made in genuine admiration and respect for my desire to help others. If you do not agree with these terms and conditions, then you must advise me immediately.
I need to back away slightly from my previous answer:
Whether or not a bankruptcy court will permit rejection generally reflects the court's perception of whether the debtor has legitimate financial problems or is merely trying to avoid the effects of an ill-considered contract. Most courts permit the trustee reject a personal services contract, including any noncompetition covenants, if there is a legitimate bankruptcy purpose. See Delightful Music Ltd. v Taylor (In re Taylor) (3d Cir 1990) 913 F2d 102 (debtor with financial problems permitted to reject exclusive recording contract). But see In re Carrere (Bankr CD Cal 1986) 64 BR 156 (contract between debtor and third party "that is based upon the personal service or skill of the debtor" does not become property of Chapter 7 or Chapter 11 estate and is therefore not subject to rejection in cases under Chapter 7 or 11).