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[1]In yet another example of the lingering impact of the recession on the residential mortgage industry, the U.S. Bankruptcy Court for the District of Hawaii has weighed in on the meaning of a debtor's election to "surrender" his or her residence in a chapter 7 case.
The recent spate of major retail bankruptcy filings — Sports Authority, Radio Shack, Wet Seal, PacSun and Aeropostale, to name a few — have thrust landlords into the middle of unfamiliar and complex chapter 11 restructurings and asset sales. Whether the tenants in such cases intend to internally reorganize or liquidate their assets through one or more sales, they often seek to either assume or assume and assign their most attractive leases.
It’s been another great year for the Real Estate Committee. First, as co-chairs, we would like to thank its members for their support and continued participation on the Real Estate Committee for 2016. The committee is really only as good as its members and their contributions. In that vein, the committee is always looking for contributors to its newsletter, suggestions for presentation topics, or help producing new webinar content. If you are interested in contributing to the committee, please reach out to any of the committee leaders.
One of the benefits of purchasing a debtor’s assets through the bankruptcy process is the opportunity to obtain an order from a bankruptcy court approving the sale free and clear of other parties’ interests in the purchased property, pursuant to § 363(f) of the Bankruptcy Code.
In a recent opinion delivered by Judge Huennekens in the case of In re Alpha Natural Resources Inc., et al.,[1] the bankruptcy court permitted the debtor, Alpha Wyoming Land Co., to reject a settlement agreement that required the payment of a royalty, the amount of which was based on a percentage of the coal mined and subsequently sold by the debtor from various areas in the state of Wyoming.
Considering that bankruptcy cases typically involve divvying up a less-than-whole pie, it should not come as a surprise when a court disfavors debtors trying to have their cake and eat it, too.
Lenders frequently require that the insiders of single-asset real estate borrowers[1] personally guarantee their companies’ debt to the lender. If the borrower defaults on its obligations and files for bankruptcy, the automatic stay prohibits the lender from pursuing or continuing any collection efforts against the borrower in bankruptcy. However, the automatic stay does not prohibit the lender from exercising remedies against the insider with respect to the insider’s guaranty liability.
There is a split among bankruptcy courts as to whether a debtor may modify his or her state law right of redemption through a chapter 13 plan after his or her real property is sold at a tax sale.[1] Section 1322 of the Bankruptcy Code permits a debtor to modify the rights of secured claims through a plan under certain enumerated circumstances.[2] The threshold question, however, is whether or not a debtor’s right of redemption can be characterized as a “claim” subject to § 1322.
