The Bankruptcy Protector

Envision a scenario in which you purchased a right of first refusal for a parcel of real estate. That right, as bargained for, would let you purchase the parcel if it was put up for sale by matching any competing bidder’s offer. As a diligent prospective purchaser, you would naturally record that right of first refusal in the appropriate land records. So far so good.

The Bankruptcy Protector

Imagine this: you sell a product to a company on credit at 8% interest until you are paid, and the company files for bankruptcy before repayment. Or maybe you are a hard money lender that made an unsecured loan at 18% to a company to bridge through hard times, and the company files for bankruptcy. Or maybe you are a secured creditor with a 5% loan on real estate, and after the borrower files for bankruptcy, you discover there is a defect in your mortgage and your lien can be stripped.

The Bankruptcy Protector

The Bankruptcy Protector

The Bankruptcy Protector

The Bankruptcy Protector

This entry is part of Nelson Mullins’s ongoing “Bankruptcy Basics” blog series that is intended to address foundational aspects of bankruptcy for non-bankruptcy practitioners and professionals. This entry will explain the concepts of the bankruptcy “estate” and “property of the estate” and the importance thereof.

The Bankruptcy Protector

Not your Ordinary Bankruptcy Case

Columbia, South Carolina is hot during the summer, such that the City adopted the motto “Famously Hot” a few years ago. Temperatures frequently exceed 100 degrees in the summer. On June 12, 1987, the PTL Club filed chapter 11 cases in Columbia, adding heat to the already hot City.

The filing of a bankruptcy petition under any chapter of the Bankruptcy Code creates the ‘automatic stay,’ which prevents creditors from taking any further action against either the debtor or the debtor’s assets during the bankruptcy. Seasoned bankruptcy attorneys know that a violation of the automatic stay is a serious matter and, because of this, appropriately advise their clients on complying with, or enforcing, the stay. However, stay violations can inadvertently occur even when all reasonable and necessary precautions are taken.