Foreclosure is usually the remedy of choice used by secured creditors to monetize their real estate collateral; however, there are situations where a sale of real estate through receivership could be an attractive alternative to foreclosure. Where circumstances have given cause for appointment of a receiver to operate, manage, and stabilize property in the short term, the option of a receiver sale should be considered, especially where title to the property does not need to be cleansed of junior encumbrances through the foreclosure process. In states with a lengthy judicial foreclosure process, a receiver’s sale can result in a much more timely disposition by avoiding the usual baked-in litigation delays of initial answer time and procedural timelines applicable to motions for default and/or summary judgment. In judicial foreclosure states where the sale is conducted by statute only through the local sheriff or appointed commissioner, a receiver’s sale can put conduct of the sale in the hands of a real estate professional who can employ a market program and design a sale process which is more likely to lead to better commercial results. Even in states which enjoy a fairly expeditious non-judicial foreclosure process allowing for a quick sale, the receiver’s sale can prove the best means of ultimate disposition of the property where the creditor wishes to avoid taking the property in as real estate owned. This factor can be particularly compelling for banks wishing to mitigate the risk of holding an operating property such as a hospitality property or one which presents potential environmental issues such as an industrial property. In multijurisdictional portfolio cases where a federal receivership action has been filed as to properties in different states, a receivership sale under the federal statue can be considered to avoid disposition of properties on different timelines due to various applicable foreclosure laws in each state. In non-judicial foreclosure states where the creditor or its servicer is prepared to take the collateral in as real estate owned, foreclosure is likely the quickest and simplest route. Where other factors are at play, receivership sales are worthy of consideration.
On May 16, the bankruptcy world of “actual fraud” got larger. In an opinion delivered by Justice Sotomayor, the Supreme Court addressed what it recognized was a deepening circuit split regarding the interpretation of “actual fraud” in 11 U.S.C. § 523(a)(2)(A). After analyzing the history and structure of the code section, the Court rejected a narrower interpretation of the statute requiring that the debt be procured by a false representation at the time of inducement and clarified that “actual fraud” included traditional forms of fraud, such as a fraudulent transfer or similar wrongdoing.
Criminal law and procedure can make even the most seasoned bankruptcy and restructuring lawyers uneasy. However, the Fifth Amendment privilege, in particular, does arise in civil matters from time to time. And there can be significant implications on discovery, motion practice, and trial. (more…)
Chapter 56 of the Florida Statutes provides the framework for judgment creditors to collect on money judgments. Section 56.29 governs the process by which a judgment creditor may seek to recover property transferred to, or concealed by, third parties. However, the lack of procedural clarity in the statute led to conflicting decisions and uncertainty. Amid due process concerns, courts often erected significant procedural hurdles to cost-effective collection efforts against third parties. The new amendments to Section 56.29, which become effective on July 1, 2016, provide practitioners with some much needed clarity. (more…)
Good faith is generally understood to mean honesty or sincerity of intention. But in the law, things are often not as straightforward as that. It has been called an intangible and abstract quality and said to include such concepts as an honest belief, the absence of malice and the absence of fraud. It has also been said that good faith is an individual concept borne from the minds of men as derived from their inner spirit such that it may not be evidenced by words alone. (more…)
Although the news is filled with stories of falling oil and gas prices and suggestions that a third of the exploration and production companies may file for bankruptcy, this most recent downturn may not produce the bankruptcy filing boom many anticipate. True, some overleveraged E&Ps will likely file, if for no other reason than to provide an orderly transfer of their reserves and their attendant plugging and abandonment liabilities. These cases will likely involve quick Section 363 sales, or now more likely, debt for equity transactions, but service providers such as vessel operators, rig operators and other suppliers will likely not find filing petitions for relief particularly useful – nor might their lenders. (more…)
The holiday shopping season has long been the most important time of the year for many retailers. In the past, it has been common for troubled retailers to file for bankruptcy protection in the months following the holiday season. The difficult retail environment in 2015 was reflected in bankruptcy filings by prominent retailers such as Radio Shack, American Apparel, Cache and Quiksilver, and by numerous shopping mall closures. Many commentators anticipate that one or more significant retailers will file for bankruptcy in early 2016. Recognizing these risks, commercial and retail landlords should consider taking measures to help minimize disruption and losses from troubled tenants and potential bankruptcy filings. (more…)
While there are many factors that can lead a business or individual to file a chapter 11 bankruptcy petition seeking to reorganize a business, often times, particularly in a single-asset real estate case, the primary impetus for the filing is a two-party dispute between a debtor and its primary secured lender. The debtor’s goal will often be to restructure its loan(s) with that lender based on changed economic circumstances such as decreased occupancy or changing interest rates. In some cases, the debtor and lender will be able to negotiate mutually acceptable modifications to the loan(s), and incorporate them into a consensual chapter 11 bankruptcy plan. In most cases, if the debtor and its primary secured creditor in the case can agree on a plan, unsecured creditors received a reasonable dividend, and there are no “absolute priority rule”1 issues, a bankruptcy court will approve the consensual plan. (more…)
Although commonly known, judgment creditors rarely utilize the charging order as a collection mechanism. This may change as a result of recent case law developments. (more…)
In an update to Kevin Stine’s June 6, 2014 article explaining the Georgia Court of Appeals decision to bid adieu to select foreclosure confirmation hurdles, the District Court for the Northern District of Georgia recently posed inquiries seeking to possibly reverse the precedent that preserved post-foreclosure liability of personal guarantors. In PNC Bank, N.A. v. Kenneth D. Smith, et. al, Judge Eleanor Ross asks the Supreme Court of Georgia the precise limitations and conditions precedent of O.C.G.A. § 44-14-161 as it impacts the necessity of confirming a foreclosure sale prior to seeking a deficiency judgment against obligors, despite the existence of affirmative case law on the topic. (more…)