Ipso facto clause

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A provision allowing one party to terminate or accelerate a payment if the other party goes bankrupt. Generally invalid under the Bankruptcy Code because a trustee is not bound by any provision that is conditioned on the debtor's insolvency.

11 USC §365(e)(i) states:

Notwithstanding a provision in an executory contract or unexpired lease, or in applicable law, an executory contract or unexpired lease of the debtor may not be terminated or modified, and any right or obligation under such contract or lease may not be terminated or modified at any time after the commencement of the case solely because of a provision in such contract or lease that is conditioned on—

(A) the insolvency or financial condition of the debtor at any time before the closing of the case;

(B) the commencement of a case under this title; or

(C) the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement.