What is a Single Asset Real Estate Bankruptcy? It is a category within Chapter 11 bankruptcy and has to do with the designation of the type of real property that is owned by the debtor with secured debt.
The United States Courts website (www.uscourts.gov) defines single asset real estate as "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).
Bankruptcy is a legal declaration that an individual or business is unable to pay their debts. Bankruptcy is also a legal process by which a debtor can be protected from their creditors when they are unable to pay their debts and a means for assets to be liquidated in order to discharge as much outstanding debt as possible among creditors. Individuals and businesses can file for bankruptcy or creditors can file bankruptcy against an individual or business in an attempt to recoup some of the debt owed to them. In all cases, bankruptcy must be approved by the courts.
Single Asset Real Estate Bankruptcies proceed with special provisions that are not found in other Chapter 11 bankruptcy filings. When a bankruptcy debtor is not foudn to have single asset real estate, the debtor is given an automatic stay that protects them from having their creditors file further legal action. This automatic stay is normally in effect during the entire Chapter 11 bankruptcy.
However, single asset real estate bankruptcies have a much shorter period of time when the automatic stay protecting the debtor from further legal action on the part of their creditors is in place. Typically the automatic stay does not last longer than 90 to 120 days.
To prevent creditors from receiving relief from the automatic stay by the courts, a single asset real estate debtor should file an acceptable reorganization plan and start making interest payments to their creditors within 90 days of filing Chapter 11 bankruptcy. Alternatively, if it was not clear that the debtor qualified as single asset real estate, and then the courts determined that it was the debtor should begin interest payments to their creditors within 30 days of that determination.
Obtaining competent legal advice long before Chapter 11 bankruptcy is critically important. An experienced bankruptcy attorney can analyze your situation and help you formulate a successful plan to reorganize your debt and emerge a stronger company ready for a productive future.