An Introduction to Bankruptcy Code §1111(b)
by John Collen
Duane Morris LLP; Chicago
Section 1111(b) is sometimes regarded as one of the more recondite sections of the Bankruptcy Code. Although its semantics are sometimes complicated, and its true import depends on its relationship to other Code sections, its concepts are actually quite straightforward. The purpose of this article is to explain what §1111(b) provides, and why. From that basic discussion emerges guidance for the practitioner on when to exercise the infamous “Section 1111(b) Election.”
Read the full article. (Materials from the 2007 Rocky Mountain Bankruptcy Conference)
Cash and Related Problems for the Real Estate Debtor
By John F. Young
Block Markus & Williams LLC; Denver
BAPCPA Expands the Definition of “Single-Asset Real Estate”
Following the amendments to the Bankruptcy Code enacted by BAPCPA, the term “single-asset real estate” is now defined to mean “real property constituting 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). The BAPCPA amendments eliminate the prior limitation upon the definition of “single-asset real estate,” which required that the debtor’s real property be encumbered by liquidated secured debts in an amount less than $4 million. Therefore, BAPCPA has greatly expanded the universe of potential single-asset real estate cases.
Read the full article. (Materials from the 2007 Rocky Mountain Bankruptcy Conference)
Confirmation Issues Affecting Businesses Whose Primary Business Activity Is Based on the Ownership, and Operations Associated with, Real Estate
By Duncan E. Barber
Bieging Shapiro & Burrus LLP; Denver
This section considers issues affecting formulation and confirmation of a plan of reorganization where the debtor’s primary business activity is based upon ownership, and operations associated with, real estate. A common feature of real estate based Chapter 11 cases is a single secured creditor with a lien against the debtor’s real property assets, whose secured claim is larger, sometimes overwhelmingly larger, than all other claims in the case. The loan is in default and the secured lender wants to exit the credit, through foreclosing and selling its collateral. Conversely, the debtor, that is, the debtor’s owners, hope to restructure the secured loan, in order to hold on to the real estate and, hopefully, realize future appreciation, whether from ordinary market conditions (i.e., the historic tendency of real estate to appreciate over time) or just simply stabilization of the underlying asset. The more extreme the debtor’s financial situation (a single undersecured creditor, with a large deficiency claim, and no or virtually no other creditors), the more difficult confirmation will be. The case law addressing the extreme fact pattern is helpful in formulating a plan of reorganization, but not definitive as to how issues will be resolved in the course of confirmation.
Read the full article. (Materials from the 2007 Rocky Mountain Bankruptcy Conference)