Real Estate Bankruptcy

Although real estate bankruptcy cases no longer dominate the bankruptcy courts' dockets as they did in the early nineties, but they continue to be filed with great frequency in UK. At its essence, the real estate bankruptcy is a two party dispute between mortgagee and mortgagor. Real estate bankruptcy cases are typically filed after a foreclosure sale has been set. Upon learning of the bankruptcy filing, a secured creditor has a number of available options, all or some of which should be exercised, depending on the facts of the case, to maximize loan recovery.

A lender can ask the court to dismiss the bankruptcy case as a "bad faith" filing. A creditor asserting bad faith must prove the subjective bad faith of the debtor and that any reorganization by the debtor is objectively futile. For subjective bad faith, the court will examine whether the debtor invoked the protections of the Bankruptcy Code without either the intention or ability to reorganize its financial affairs. To determine objective futility, the court will examine whether there is indeed a "going concern" to preserve and whether there is any realistic chance for the debtor to reorganize. Most courts require a very strong showing to dismiss a case for bad faith at the outset of a case.

Under the Bankruptcy Code a motion for relief from stay will also be granted where the secured creditor can prove that there is no equity in the real property over and above the secured claims, and that the property is not necessary to the debtor's effective reorganization. This basis for relief is typically alleged as an alternative to bad faith, in the same motion. Almost all controversies surround the value of the real property, making the expert report and testimony of a licensed real estate appraiser essential to the successful prosecution of a motion for relief from the automatic stay on these grounds. The same factors relied upon to support objective futility in the bad faith filing analysis are used to establish that the property is not necessary to an effective reorganization.

An alternate ground for relief from the automatic stay is lack of adequate protection of the secured creditor's interest in the property. For example, if the real property is deteriorating in value and the lender is not receiving post-petition payments, the lender's security interest in the property is not adequately protected.

A creditor holding a properly perfected assignment of rents has a lien on "cash collateral" under the Bankruptcy Code. If the assignment of rents was properly perfected pre-petition, it usually attaches to the post-petition rents generated by the debtor's real property.

A debtor may not use cash collateral without either a court order or the consent of the secured creditor. While it is common in nonsingle asset realty cases for a debtor to negotiate a cash collateral agreement with the secured creditor before filing for bankruptcy, in single asset real estate cases, which are typically filed at the eleventh hour for the express purpose of stopping a foreclosure, such negotiations are virtually nonexistent.

Unless, within the first day or two of the case, the debtor requests a cash collateral agreement with the lender, or files a motion with the court to authorize the debtor's use of post-petition rents, a lender should immediately advise the debtor in writing that it may not use cash collateral absent an agreement. If an agreement is not reached, the debtor will usually petition the court for authorization on an emergency basis. The lender can also petition the court to deny authorization on the basis that the debtor lacks the ability to adequately protect its interests in the rents. In the final analysis, most secured creditors share the same objective when faced with a real estate case: to extract their collateral, including rents, from the bankruptcy as quickly and inexpensively as possible.

About The Author

Writer of this article is working as a webmaster of www.ukadvice.com. Also writes business related articles for different article sites. For further details and free bankruptcy advice:

Naylor Parkes Associates Ltd.
Lawford House, Lawford Close
Birmingham
B7 4HJ
West Midlands
United Kingdom.

http://www.ukadvice.com

webmaster@ukadvice.com

---

Are You Profiting From O.P.P.?

Are you profiting from O.P.P.? If not, why not? We... Read More

Theres More To Making Money Than A Tertiary Education

An education of some sort is a prerequisite these days... Read More

The Real Estate Market In Spain: Making Profits Out Of Sand

The Real estate market in Spain keeps gaining momentum and... Read More

Get To Know About Building Codes & Town Planning Applications, If You Want To Build A House

These are real building questions that I received from readers... Read More

What Is a CMA

"CMA" is an abbreviation real estate agents use for a... Read More

One Stop Shop for Buy to Let

As the buy to let market continues to go from... Read More

How to Make Money from the California Real Estate Gold Rush

What do the Californians know that we don't?What is so... Read More

Finding, Fixing, Financing, and Flipping - The Short Course

Most people get involved in Real Estate investing to make... Read More

Buying A Home ? Rain, Sun, and Weather Issues

When buying a home, it can be easy to overlook... Read More

Ten Big Mistakes That Will Lose That Property Sale

If you are serious about selling your home, you probably... Read More

Dont Get Stuck Having To Deal With The Sellers Household Hazardous Wastes - After You Move In!

I have a confession to make!I was just outside with... Read More

The Letting Agents Role

Letting agents play an important role in the buy-to-let industry... Read More

What are the Top 11.5 Criteria for Selecting an Orlando Investment Property

1. Make sure units are larger than 1800 square feet.This... Read More

Empty Nesters Flock To Inner City

Babyboomers whose children have left home, commonly known as "empty-nesters"... Read More

6 REASONS for Investing in Florida Real Estate Investment Property NOW

I invite you to take the next few minutes to... Read More

What is a Predatory Lender?

Several months ago, the 3,000-member California Association of Mortgage Brokers... Read More

Golf and Waterfront Living: Live, Play, Relax

With today's planned lifestyle communities, golf and boating enthusiasts have... Read More

Making Money In Real Estate - 10 Ways

Making money in real estate is an endless topic that... Read More

Buying a Home ? Dealing With Lender Letters

Most people who set out to buy a home, be... Read More

The Professional Investors Plan

The art of using high-leveraged activities.Here I would like to... Read More

RESPA: The Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) is a consumer... Read More

Essential Buyer?s Guide for Overseas Real Estate

It's been said many a time that overseas real estate... Read More

Home Owners: Disclose the Facts!

One of the most common causes for disputes occurring after... Read More

Do You Speak Real Estate?

Anyone interested in real estate should be able to talk... Read More

The 5 Biggest Mistakes Made When Getting A Business Appraised

Most business owners will, at some point, want or need... Read More

Where is Florida Investment Property

Florida Investment Property ? Why Investing is a Wise Decision... Read More

Escalation Clauses ? A Home Buyers Secret Weapon

Today we discuss escalation clauses because much of the country... Read More

Refinancing Your Home Loan? When Should You Refinance Your Home?

If you have a current mortgage and are unhappy with... Read More

Credit Help: Buying Real Estate -- Not the Same as Buying Cars

Credit for Buying Real Estate is Different than Credit for... Read More

Be Careful - A Real Estate Agent Could Lead You Astray

The real estate agent is a valuable source of potential... Read More

Investment Property Part I: How Not to Become a Slumlord

After riding the ups and downs of the stock market... Read More

Tenant/Buyers Have Multiple Options

Lease Purchasing affords the tenant/buyer a wonderful opportunity to get... Read More

How to Achieve Financial Freedom with Your Home

The secret disclosed on how you too could achieve financial... Read More