Lenders often require their borrowers to be “special purpose entities” in real estate transactions. This is a way that lenders can mitigate their bankruptcy risk in the event that the borrower or any of its parent entities file for bankruptcy. In addition, since most real estate financing is non-recourse, lenders require that the borrower is a separate, special purpose entity so that no other property or business will impact the property which is the subject of the underlying loan.

A recent decision of New York’s highest court potentially strengthens the ability of lenders to bring suits against third parties for participation in a borrower’s breach of single purpose entity/bankruptcy remote loan document covenants.

A recent decision of New York’s highest court potentially strengthens the ability of lenders to bring suits against third parties for participation in a borrower’s breach of single purpose entity/bankruptcy remote loan document covenants.

In a comprehensive report issued last week, the American Bankruptcy Institute Commission on Consumer Bankruptcy proposed recommendations that would allow student loans to be easier to discharge in bankruptcy, citing the staggering $1.5 trillion in student loan debt held in the United States and the current difficulties with discharging this type of debt in bankruptcy.