Single Asset Real Estate Bankruptcies: Where Strategy Meets Ethics

Single asset real estate (SARE) bankruptcies sit at a unique intersection of law, finance, and practical business realities.  At first glance, these cases appear simple, often involving a single property, a single borrower, and a single lender.  But beneath that simplicity lies a complex mix of strategy, legal nuance, and ethical considerations that can significantly influence outcomes. Understanding these cases requires not just familiarity with bankruptcy law, but also an appreciation for how financial pressure, timing, and professional judgment come together in real-world scenarios.

The SARE Bankruptcy Case Explained

A single asset real estate case generally involves a debtor whose primary (and often only) business is owning and operating a single piece of real property. These cases are common because many real estate investments are structured as single-purpose entities,  designed specifically to isolate risk.

One of the defining features of a bankruptcy filing, particularly in SARE cases, is the automatic stay, which acts like a ‘pause button,’ immediately halting foreclosure and other collection efforts. For distressed borrowers, it can provide critical time to regroup and pursue a restructuring strategy.

However, that time is limited. SARE debtors typically must either propose a viable reorganization plan or begin making payments to secured creditors within a relatively short window, often around 90 days. This creates urgency and forces both sides to act quickly.

Unlike large corporate bankruptcies involving dozens of stakeholders, SARE cases are frequently described as two-party disputes. On one side is the borrower trying to preserve value or avoid foreclosure. On the other is the lender seeking to recover its collateral.

This dynamic creates tension. From the debtor’s perspective, bankruptcy can be a strategic tool to buy time or restructure debt.  From the lender’s perspective, it can appear to be a delay tactic. As a result, courts tend to scrutinize these cases closely.

Strategic Use vs. Bad Faith

One of the most debated issues in SARE cases is whether a bankruptcy filing is made in good faith.

It is common for borrowers to file bankruptcy on the eve of foreclosure. From a strategic standpoint, this can make sense; it preserves options and creates leverage for negotiation.

But courts will examine whether the filing serves a legitimate reorganization purpose or merely delays creditors.

A filing may be considered in bad faith if:

• It is essentially a two-party dispute better resolved outside bankruptcy
• The debtor lacks a realistic path to reorganization
• The timing suggests an intent solely to delay foreclosure

Factors that may weigh in favor of allowing the case to proceed include:

• It is the debtor’s first bankruptcy filing
• There is no evidence of misconduct
• The debtor is attempting to preserve operations or mission

In such cases, a court may allow the bankruptcy to continue while still granting the lender relief from the automatic stay, effectively balancing both interests.

Navigating Ethics in SARE Cases

In taking on SARE bankruptcies, lawyers must balance advocacy for their clients with obligations to the court and the legal system, particularly in situations where the legal strategy may be permissible, but the intent behind it raises questions.

In navigating these situations, Samantha Ruben of Dentons recommends listening to the ‘gut feeling’ you may get that something is not quite right. Matt Christensen of Amplēo offers a similarly practical take: “I always think of ethics as sort of the classic ‘smell test.’ ”

In other words, ethical decision-making is not always about clear rules and often involves personal ethics and judgment calls. In bankruptcy, where disclosure is extensive and scrutiny is high, attempts to obscure facts are rarely successful.

Conflicts of Interest

Conflicts of interest often arise when the borrower’s principal has personally guaranteed the loan. In such situations, the interests of the company and the individual may diverge. What benefits the company, such as restructuring the debt,  may not benefit the guarantor, who could still be liable for any deficiency.

Richard Corbi of the Law Offices of Richard J. Corbi PLLC notes that in these situations, these lines can blur, because what’s best for the company is not best for the principal. This makes it critical for attorneys to clearly define who they represent and, in many cases, to recommend separate counsel.

Approaching a SARE Case With a Realistic Plan

One of the biggest mistakes debtors make in single asset real estate cases is filing for bankruptcy without a clear and realistic path forward. While the automatic stay can provide immediate relief, it is not a long-term solution; it is a temporary pause that must be used productively.

Courts expect debtors to come into bankruptcy with a plan, or at least a credible framework for one. In SARE cases, especially, the timeline is compressed. Debtors are typically required to either propose a confirmable plan of reorganization or begin making payments to secured creditors within a relatively short period. This means there is little room for delay, speculation, or wishful thinking.

A viable plan generally falls into one of three categories:

• Refinancing the debt: This requires demonstrating that new financing is realistically available. Courts will look for evidence, such as term sheets, lender discussions, or commitments, not just vague statements that financing might be obtained.
• Sale of the property: A debtor may propose to market and sell the asset. However, the court will expect to see a concrete strategy, including broker engagement, marketing timelines, and credible valuation assumptions. Simply hoping for a buyer is not enough.
• Restructuring the existing loan: This involves modifying terms with the current lender, such as extending maturity dates, adjusting interest rates, or cramming down the secured claim to the value of the collateral. Again, feasibility is key; the debtor must show that the restructured terms can actually be met.

From a legal standpoint, feasibility is a core requirement for plan confirmation. A plan cannot be based on unrealistic projections or unsupported assumptions. Courts routinely reject plans that depend on speculative future events or overly optimistic financial forecasts.

From a practical standpoint, lenders will quickly test whether a plan is real. They may challenge valuations, question revenue assumptions, or push for relief from the automatic stay if they believe the debtor is simply delaying the inevitable.

This is why experienced practitioners emphasize preparation before filing. Ideally, the groundwork for a plan, whether refinancing discussions, sale efforts, or restructuring proposals, should already be underway prior to the bankruptcy filing.

Without that plan, the likely outcomes are straightforward: the court may dismiss the case for lack of good faith, or grant the lender relief from the automatic stay, allowing foreclosure or other remedies to proceed.

In short, bankruptcy is not a place to figure things out; it is a place to execute a strategy.

Final Thoughts

Single asset real estate bankruptcies are deceptively simple. They involve fewer parties and less complexity than large corporate cases,  but they demand careful strategic and ethical judgment.

The key takeaway is that while bankruptcy can be a powerful tool, it is not a free pass. Courts expect transparency, good faith, and a genuine effort to resolve financial distress.

Professionals working in this space must constantly balance competing pressures by advocating for clients while adhering to ethical standards and legal requirements. Here, David Levy of Keen-Summit Capital Partners LLC  reminds us of a case study showing that the cumulative effect of decisions matters. Even if each step seems reasonable on its own, the overall picture created can be misleading and raise both ethical and legal questions.

In the end, success in SARE cases often comes down to preparation, honesty, and the ability to recognize when a strategy crosses the line from aggressive to problematic.

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To learn more about this topic view  Single Asset Real Estate Cases. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles on single asset real estate.

This article was originally published on April 16, 2026.

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