Bankruptcy rulings help real estate developers, rile lenders

bankruptcy court signBy Mike Sunnucks | Phoenix Business Journal

Banks and lenders are upset with two federal bankruptcy court rulings stemming from an Arizona case that could set national precedents in how creditors approve settlements.

The ruling in Wells Fargo Bank NA vs. Loop 76 LLC could help real estate developers and home builders trying to reorganize via Chapter 11 bankruptcy protection. The new rules give smaller creditors more of a say in reorganization at the expense of larger creditors, particularly lenders.

The business implications of such a ruling, stemming from a 2010 bankruptcy case of a Scottsdale real estate developer, could be felt far and wide as lenders typically get first crack at assets. With smaller creditors having more sway it could mean assets are spread out much differently in future bankruptcy cases.

Continued:

If you’d like to discuss real estate matters, contact RLG founder Jordan Rose, jrose@roselawgroup.com

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