If C argues for lack of equity (claims to be BUT undersecured), court determines that there IS equity, then C (as will oversecured) argue for interest/fees/costs (as per BUT, potential § 506(b))… estoppel defense for D C admitted to being when undersecured moving for relief (D MAY plead uncertainty as defense to D’s estoppel defense) Lack of equity also relevant to more likely to obtain § 362(d)(1) if D has NO equity in property relief for cause If C seeks relief under then D MAY attack underlying claim as § 362(d)(2), if potential to trigger claim, then preferential/fraudulent transfer avoidance MAY be better for C to NOT seek relief § 362(d)(3) single asset real estate exception small entity w/ single parcel generating income Single asset real estate (“SPE”) (i.e. corp./limited partnership) owns Special purpose entity apartment building SHs (OR, limited partners) issue in guaranties favor of C-lender (holding on apartment building)… TD BUT, C-lender unable to obtain relief from SPE Ch. 11… … under automatic stay § 362(d)(2) In bankruptcies, C entitled to relief… unless, within single real estate 90 days of bankruptcy… D files w/ plan of reorganization probability of being “reasonable (AND, NO such probability if confirmed within reasonable time” claim is larger than all unsecured Cs’ claims) deficiency –OR– D makes monthly payments (unlikely) scheme involving of ownership/interest in § 362(d)(4) transfer real property OR multiple bankruptcy filings effecting property D1 owns subject to just as C is about to foreclose, D1 real property TD… files for bankruptcy… then, C obtains relief from BUT, automatic stay… D1 has transferred to D2… process repeats (bankruptcy, then real property relief, then new D) 2 ways this happens… D1 entitites (i.e. to take title “D2”) Scammers (“foreclosure consultants”) form entities to take title… then, scammer MAY kick D1 off property rent property to … tenants w/o paying off (“rent TD skimming”)…
If C argues for lack of equity (claims to be undersecured), BUT court determines that there IS equity, then C (as oversecured) will argue for interest/fees/costs (as per § 506(b))… BUT, potential estoppel defense for D C admitted to being undersecured when moving for relief (D MAY plead uncertainty as defense to D’s estoppel defense) Lack of equity also relevant to § 362(d)(1) more likely to obtain relief for cause if D has NO equity in property If C seeks relief under § 362(d)(2), then D MAY attack underlying claim as preferential/fraudulent transfer if potential to trigger avoidance claim, then MAY be better for C to NOT seek relief § 362(d)(3) single asset real estate exception Single asset real estate small entity w/ single parcel generating income Special purpose entity (“SPE”) (i.e. corp./limited partnership) owns apartment building SHs (OR, limited partners) issue guaranties in favor of C-lender (holding TD on apartment building)… … SPE Ch. 11… BUT, C-lender unable to obtain relief from automatic stay under § 362(d)(2) In single real estate bankruptcies, C entitled to relief… unless, within 90 days of bankruptcy… D files plan of reorganization w/ “reasonable probability of being confirmed within reasonable time” (AND, NO such probability if deficiency claim is larger than all unsecured Cs’ claims) –OR– D makes monthly payments (unlikely) § 362(d)(4) scheme involving transfer of ownership/interest in real property OR multiple bankruptcy filings effecting property D1 owns real property subject to TD… just as C is about to foreclose, D1 files for bankruptcy… then, C obtains relief from automatic stay… BUT, D1 has transferred real property to D2… process repeats (bankruptcy, then relief, then new D) 2 ways this happens… D1 entitites (i.e. “D2”) to take title Scammers (“foreclosure consultants”) form entities to take title… … then, scammer MAY kick D1 off property rent property to tenants w/o paying off TD (“rent skimming”)…
Bankruptcy_Schechter-Fall-2009.docx