Many businesses are—or soon will be—unable to meet their obligations. Not all businesses in distress are unsuccessful; sometimes, as in the economic circumstances arising from the novel coronavirus (COVID-19) and the governmental directives tailored to address the related public health issues, even successful businesses must confront closures and steep declines in demand that could not have been anticipated, and may find it necessary or desirable to restructure their existing debt obligations.

When a defaulted borrower files a bankruptcy petition, two important events occur: (1) a bankruptcy “estate” comprised of certain assets of the debtor is created; and (2) all collection efforts (and pending litigation) against the debtor or its assets are automatically stayed. Accordingly, the court’s determination of whether items are or are not property of the debtor and of the bankruptcy estate is of critical importance to the creditor’s ability to collect on its debt.

In a ruling on February 28, 2013, the U.S. District Court for the Central District of Illinois reversed the February 29, 2012 order of the U.S. Bankruptcy Court for the Central District of Illinois allowing a bankruptcy trustee to avoid an Illinois mortgage as to unsecured creditors for lack of “constructive notice” because the mortgage did not expressly state the maturity date of and interest rate on the underlying debt (In Re Crane, Case 12-2146, U.S. Dist. Ct., C.D. IL, February 28, 2013).