Single asset bankruptcy cases typically involve a business or individual that owns only one piece of property that is the major income generator. The individual or business is unable to pay the mortgage on that property but they may be able to pay other types of business or personal loans and creditors. Filing a single asset real estate bankruptcy is generally done using Chapter 11 bankruptcy rules; however it isn't the right answer for everyone. Consulting with an attorney that can advise you of the risks and benefits involved in this type of bankruptcy is highly recommended.
What Property Can be Included In Single Asset Real Estate Bankruptcy?
Typically most single asset real estate bankruptcy cases will include property that is a business, commercial building, vacant piece of commercial or multi-unit residential property or a rental type of property such as condos or apartments. The asset, which in this case is the property and building, is responsible for making the money to pay for itself. In general cases the property in bankruptcy is owned by a corporation, partnership or limited liability company but it can also be owned by a private individual under specific conditions.
Characteristics of a Single Asset Real Estate Bankruptcy
Every bankruptcy is slightly different; however with single asset cases there are some hallmarks or characteristics that must be present. In general the debtor must be unable to pay the creditor, which is the mortgage holder or lender for the property, but they may be able to pay all other creditors. In addition to the creditor the business or individual may also owe on expenses related to the property such as back taxes or current property taxes, utilities or other expenses such as property maintenance.
In addition the case will also include:
- One single piece of property that may be relatively low in value to very high value property types such as shopping malls or luxury hotels
- The property must earn the bulk of the income for the owner, excluding a family farm property
- The debtor must not have another substantial income from another business or company
Residential properties of less than four units are not considered in single asset real estate bankruptcy cases.
Getting Legal Help
New laws regarding bankruptcy in general and Chapter 11 bankruptcy specifically have made it more difficult to file for single asset real estate bankruptcy. To avoid common errors and to ensure you can file for protection of the property it is essential to consult with an experienced bankruptcy attorney before making any decisions.
