If It Looks Like a Duck, err, a SARE Debtor...


Recently, the Ninth Circuit Court of Appeals brought smiles to the faces of many lenders (especially Bank of America, the appellee and secured lender) when it refused to combine the assets of related debtors without a substantive consolidation order and held that a single asset real estate debtor will be treated as a single asset real estate debtor.

Let’s take a little detour – some background information may be necessary. In 1994, the Bankruptcy Code (§ 362(d)(3)) was amended to include provisions relating to the “single asset real estate” (“SARE”) debtor. A SARE debtor (§ 101(51B)) is a debtor that owns a single property (commercial or residential with 4 or more units) which generates substantially all of the gross income of the debtor, is not a farmer and is not engaged in any other business (other than owning and operating that property). These provisions are fondly (at least in some circles) referred to as the “SARE Provisions.” The SARE Provisions require a debtor to propose a confirmable plan or commence making payments equal to the contract rate of interest (as opposed to default interest) due on the loan within a short time frame (90 days after entry of an order for relief or 30 days after the court determines that the SARE Provisions apply). If a SARE debtor fails to comply, a creditor (well, any creditor whose claim is secured by the property) may obtain relief from the stay and commence foreclosure. The effect of the SARE Provisions has been to shorten the life of a case and the economic burden placed on creditors whose claims are secured by a SARE debtor’s property.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.