An exasperated loan officer emailed us asking whether a borrower, in this case, a commercial real estate lessor, could file for chapter 11 reorganization bankruptcy and evade a state court order appointing a receiver in a foreclosure proceeding against the borrower’s building.
A qualified yes.
If a debtor admitted that they filed the case solely to delay a secured creditor’s foreclosure, then, upon your motion, the court may well dismiss the case leaving the lender free to continue the foreclosure proceedings.
Such admissions are rare, and without one, a court is unlikely to dismiss a chapter 11 case filed by the debtor. Courts are usually willing to give a debtor some time in which to pull together a reorganization plan, provided that the debtor also provides adequate protection to the lender.
Consider exploring three possible ways in which to get a chapter 11 plan dismissed.
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This is an updated version of an article originally published on April 29, 2019. It has been updated by Cathy Cagle]
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