In my prior post on this topic, I noted that a “single asset real estate” debtor has but a very limited window in which to hide in bankruptcy before the inevitable unfolds. The Congressional history for this change that added the “single asset real estate” provisions to the Bankruptcy Code states that it was intended “to put additional responsibility on a single asset real estate debtor and prevent a perceived abuse of the bankruptcy process.” 93 S. Rep. No. 168, 103d Cong. 1st Sess. (1993). The history also notes that these provisions were intended to prevent real estate debtors from filing bankruptcy for the sole purpose of delaying mortgage foreclosure. Id.
Initially, this new structure within the Bankruptcy Code, was limited to mortgage loans of less than $4 million; however, the 2005 amendment to the Bankruptcy Code removed this limitation. Not to be outdone, developers responded with the tactic of placing their various “single asset real estate” projects under the control of a single, over-arching entity. This strategy — called the “whole business enterprise” – was proposed as an exception to the single asset real estate structure. This, then, gets us to the Ninth Circuit opinion.
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