How To Go Bankrupt

If you are a natural person, corporation, partnership or limited liability company that owns an income producing parcel of real property and you are behind on payments or perhaps “underwater” you should consider filing a single asset Chapter 11 real estate bankruptcy.

With the collapse of the economy and the resulting decline in real estate values, be it homes or commercial real estate, the Bankruptcy Code offers solutions for the real property owner in distress.

Not only can the automatic stay set forth in 11 U.S.C. 362 provide needed relief by staying foreclosure, but the “cram down” provisions of the Bankruptcy Code allow confirmation of a Chapter 11 plan that alters the rights of secured creditors who hold liens on real estate.

The term “single asset real estate” is defined in the Bankruptcy Code as “a single property or project, other than residential real property with fewer than four residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental.” 11 U.S.C. 101(51B).

In a single asset real estate case the debtor may fend of attacks from the secured creditor if the debtor files a feasible plan of reorganization or begins making interest payments to mortgage holder within 90 days from the date of the filing of the case or within 30 days after determination that the case is a single asset real estate case. The interest payments must be equal to the non-default contract interest rate on the value of the creditor’s interest in the real estate. 11 U.S.C. 362(d)(3).

If the debtor in a single asset real estate case can maintain the necessary adequate protection monthly interest payments, it will then have the opportunity to propose a plan of repayment that typically takes the form of an infusion of new capital, refinance, sale or cure through a payment plan over time.