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…)

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…)

Legislation liberalizing Louisiana foreclosure law was signed by Louisiana’s governor on June 5. House Bill 697 becomes effective on August 1, 2015.

One particular area where lenders strive to use technology involves the creation of electronic records containing electronic signatures.  Thus, the original documents are created on a computer and signed using an electronic signature; there is no original paper document with a handwritten signature. (more…)

On June 11, 2016, Governor Bentley (Alabama) signed into law ACT No. 2015-484 which became effective that same day. The law increases the personal property exemption available to individual debtors and surviving spouses to $7,500 and the homestead exemption to $15,000. These amounts will be adjusted every three years to reflect the change in the consumer price index.

The 1978 Bankruptcy Code was hailed as a comprehensive bankruptcy overhaul, designed, in part, to eliminate the uncertainty as to which matters could be handled by a bankruptcy referee depending on the outcome of a summary versus plenary analysis. The new system empowered bankruptcy judges to handle all bankruptcy matters, but it did not take long for the Supreme Court to wreak havoc on Congress’ new scheme. In Northern Pipeline Construction Co. v Marathon Pipe Line Co., 458 U.S. 50 (1982), the Supreme Court held that Congress violated Article III of the constitution when it gave Article I bankruptcy judges the power to hear cases that should only be heard by Article III judges. Since the Northern Pipeline ruling, Congress, litigants and courts have been attempting to understand the limits on the authority vested in bankruptcy judges. After 33 years, the Supreme Court may have offered definition in the recently decided Wellness International Networks, LTD, et al v Sharif 575 U.S. ____ (2015). (more…)

On June 1, 2015, the United States Supreme Court issued a unanimous ruling resolving a split amongst circuit courts in which the 11th circuit was the singular minority, addressing the permissibility of “lien-stripping” in chapter 7 bankruptcy cases. In Bank of America, N.A. v. Caulkett, U.S. Supreme Court, Case No. 13-1421 (2015) the Supreme Court reversed the 11th Circuit, holding that the majority of circuit courts were correct in concluding that a chapter 7 debtor cannot avoid junior liens on real property under 11 U.S.C. § 506(d). (more…)

Although healthcare properties have historically provided the smallest share of collateral used for backing CMBS transactions (currently only 0.47%), according to the most recent report from Moody’s Investors Service, “healthcare edged out all other real estate asset classes as the worst-performing property type in Q2 2014.”  This is a stark turn for the sector.  Between 1994 and 2013, healthcare, as a CMBS asset class, had the highest months to liquidation rate at 52.06 days, as compared to 26.71 days for hotel properties, 23.42 days for retail properties, 22.17 days for multifamily properties, 20.1 days for industrial properties, and 20.51 days for office properties.  To be fair, a major reason for the poor Q2 healthcare figures was the inclusion of the abnormally large “105% loss severity on the Senior Living Properties Portfolio, which liquidated with a $117.7 million loss from the GMACC 1998-C1 transaction.”  However, although an outlier due to size, the Senior Living Properties Portfolio insolvency was linked to changes in Medicare and Medicaid reimbursements, a common refrain in the healthcare industry today attributed by many (in varying degrees) to the implementation of the Patient Protection and Affordable Care Act.  (more…)

Baker Donelson’s Commercial Lender and Servicer Team is pleased to announce the release of its interactive foreclosure map, available online here. This internet guide is provided by Baker Donelson to provide quick information about the foreclosure process in Alabama, Florida, Georgia, Louisiana, Mississippi, Tennessee and Texas. Additional jurisdictions, including Maryland, Virginia and Washington, D.C. will be added in the coming months. (more…)

Anyone involved in commercial lending transactions is familiar with provisions of loan agreements that provide for compensation to the lender in the event the indebtedness is paid in advance of the contemplated due date. These provisions are heavily litigated, particularly in bankruptcy proceedings. The title used for such provisions often reflects the arguments the respective parties will take during litigation. From the lending perspective, these provisions are usually emphasized to be “prepayment premiums” to reflect their purpose. These premiums are designed to prevent a borrower from attempting to refinance at a lower interest rate in a market where the lender will not be able to obtain the same benefit of its bargain because it will likely be re-lending the funds at the same lower interest rate. From the borrowing perspective, these provisions are usually emphasized to be “prepayment penalties,” with the borrower asserting that the payment is unreasonable or punitive in nature. (more…)