August 2015

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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…)