Archive for the ‘Relief from Creditors’ Category

Chapter 11 bankruptcy filings have recently increased. Lenders have not worked with many businesses, or have not offered acceptable terms.

Lenders can foreclose even if the borrower has made every monthly payment on the schedule initially required by the mortgage. According to this article, a lender initiated foreclosure because the borrower did not keep the loan-to-value ratio below 80%. Lenders often reserve the right to foreclose if the loan to value ratio falls below an agreed level. Precisely because the market has declined substantially, borrowers are seldom in a position to make a substantial payment to reduce the loan down to 80% of the new property value. The contractual loan-to-value ratio is often 50%, particularly for undeveloped land, which can…

Most creditor actions are barred by the automatic stay once a bankruptcy case is filed. However, there is a limited set of situations in which creditors or (more commonly) the government can continue to pursue actions outside of the bankruptcy case. Further, actions by the debtor against others are not stayed. Even if litigation or other proceedings are not automatically stayed, they may still pose a significant distraction to the debtor. For example, a Chapter 11 debtor recently sought and obtained a stay of its own patent lawsuit (announced here by its adversary in litigation). If you are considering requesting…

One of the features of a Chapter 11 bankruptcy case in the United States is that creditors are automatically barred, under what is called the “automatic stay,” from collecting against the debtor or canceling contracts. The law differs somewhat in the United Kingdom, but a trade group there is pointing to US law as an example to follow. Under US bankruptcy law, a creditor wanting to repossess, foreclose, sue or collect against a Chapter 11 debtor must first obtain permission from the bankruptcy judge overseeing the case. The judge may allow a creditor, for example, to repossess a vehicle which…

Bankruptcy is naturally associated with insolvency. Often, however, an individual or business will be able to pay debts in full, yet needs relief because immediate payment would require selling assets at fire sale prices. While a debtor may not be “insolvent,” no one looks forward to selling assets at a steep discount. Fortunately, the Bankruptcy Code does not require a debtor to await full insolvency to qualify for a bankruptcy filing. It “does not require any particular degree of financial distress as a condition precedent to a petition seeking relief.” United States v. Huebner, 48 F.3d 376, 379 (9th Cir….

A Chapter 11 bankruptcy case immediately halts a foreclosure sale. On filing, an “automatic stay” immediately takes effect, stopping creditors from collecting their debts from the debtor or from the debtor’s property. For example, the Doubletree Hotel Tucson at Reid Park recently filed for bankruptcy protection to prevent a foreclosure sale. Similar filings occur every day for both homeowners and businesses. A creditor is allowed to ask the bankruptcy court to “lift” the automatic stay (for permission to proceed with a foreclosure sale or with other collection efforts). However, the debtor is given an opportunity to show that the property…