Does the Creative World School assignment agreement apply in bankruptcy proceedings?

According to the 2025 Creative World School Franchise Disclosure Document, the franchise agreement's provision for termination upon the franchisee's bankruptcy may not be enforceable under federal bankruptcy law. Specifically, a Rider to the Creative World School Franchise Agreement for use in Maryland states that the provision of the Franchise Agreement that provides for termination upon bankruptcy of the franchisee may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101, et seq.).

This means that if a Creative World School franchisee declares bankruptcy, the franchisor's right to automatically terminate the franchise agreement might be restricted by federal law. Bankruptcy law is designed to provide certain protections to debtors, and these protections can sometimes override contractual terms. The reference to 11 U.S.C. Section 101, et seq. indicates that the specific provisions of the federal bankruptcy code will govern the enforceability of the termination clause.

For a prospective Creative World School franchisee, this information is crucial because it clarifies the potential limitations on the franchisor's rights in the event of the franchisee's bankruptcy. While the franchise agreement might contain a clause allowing termination upon bankruptcy, federal law could prevent the franchisor from enforcing that clause. This does not mean that bankruptcy is without consequence for the franchisee, but it does suggest that the franchisee may have some legal recourse to continue operating the franchise during or after bankruptcy proceedings. Franchisees should consult with a legal professional to fully understand their rights and obligations under both the franchise agreement and federal bankruptcy law.