Source: https://www.samuelson-law.com/real-estate-title-problems-solutions-available-only-in-bankruptc.html
Timestamp: 2017-09-26 18:15:02
Document Index: 721667754

Matched Legal Cases: ['§362', '§ 301', '§ 78', '§ 363', '§363', '§1129', '§547', '§548', '§365', 'art:\n2']

Real Estate Title Problems – Solutions Available Only in Bankruptcy :: Washington DC Real Estate Title Attorney Samuelson Law
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I. What This Portion of the Program Does Not Cover: individual or consumer bankruptcies, residential properties or foreclosures, details of the foreclosure process, guaranties other than IDOT’s themselves, or personal or intangible property.
II. Types of Problems Created by the Bankruptcy Laws. 4 Things a Bankruptcy Court Can Do to Mess-Up a Foreclosure of, or Title to, a Parcel of Commercial Real Estate:
A. Automatic stay (11 U.S.C. §362)
1. The statute is broad enough to apply to perfection and enforcement actions
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title [11 USCS § 301, 302, or 303], or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970 [15 USCS § 78eee(a)(3)], operates as a stay, applicable to all entities, of–
2. A lender can request relief from the automatic stay
(a) More protection, for a lender, if the subject property is “single asset real estate”
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay–
(i) may, in the debtor’s sole discretion, notwithstanding section 363(c)(2) [11 USCS § 363(c)(2)], be made from rents or other income generated before, on, or after the date of the commencement of the case by or from the property to each creditor whose claim is secured by such real estate (other than a claim secured by a judgment lien or by an unmatured statutory lien); and
(4) with respect to a stay of an act against real property under subsection (a), by a creditor whose claim is secured by an interest in such real property, if the court finds that the filing of the petition was part of a scheme to delay, hinder, or defraud creditors that involved either–
(b) Advantages and disadvantages of getting a lift stay and going on to state foreclosure, as opposed to selling the distressed property in the Bankruptcy proceeding?
(i) Saving state and local transfer and recordation taxes under the Bankruptcy Code.
However, see Florida Department of Revenue v. Piccadilly Cafeterias, Inc., 128 S.Ct. 2326, 2008 U.S. LEXIS 5025 (2008) (a transfer made under 11 U.S.C. §363 vs. one made pursuant to a plan of reorganization theretofore confirmed under 11 U.S.C. §1129).
(ii) More control over the procedures (for example: a 30-day limit) vs. the risks of suffering a cram-down
(iii) Court blessing where otherwise not available
B. Voidable Preferences (11 U.S.C. §547)
1. 90 days before the filing of the Bankruptcy Petition; 1 year for transfers for insiders
2. Exception for certain purchase money security interests perfected within 30 days
(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor; . . .
C. Fraudulent Transfers and Obligations (11 U.S.C. §548)
1. 2 years before the filing of the Bankruptcy Petition; 10 years for transfers to certain self-settled trusts or similar asset-protection devices
(a) (1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily–
(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which–
D. Executory Contracts and Ipso Facto Provisions (11 U.S.C. §365)
1. Promise not to file for Bankruptcy or to permit an Involuntary Bankruptcy III. Can Title Insurance Solve the Voidable Preference or Fraudulent Transfer Problems?
A. ALTA Loan Policy 2006 covers prior transfers and certain recording issues with respect to the Insured transfer:
13. The invalidity, unenforceability, lack of priority, or avoidance of the lien of the Insured Mortgage upon the Title (a) resulting from the avoidance in whole or in part, or from a court order providing an alternative remedy, of any transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction creating the lien of the Insured Mortgage because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency, or similar creditors’ rights laws; or (b) because the Insured Mortgage constitutes a preferential transfer under federal bankruptcy, state insolvency, or similar creditors’ rights laws by reason of the failure of its recording in the Public Records (i) to be timely, or (ii) to impart notice of its existence to a purchaser for value or to a judgment or lien creditor.
B. Former ALTA Endorsement 21-06 (Creditors’ Rights) was designed to cover the Insured transfer, but was withdrawn, as an ALTA form, on 2/3/2010.
C. Now, if an Insured has an old policy with a Creditors’ Rights endorsement, the title insurance company seeks to take that away, even from the old policy, as a condition to issuing a current assignment, modification or other endorsement.
D. Why should a lender buy an endorsement, or a new title policy, if it or its subsidiary buys-in the property at the foreclosure sale, especially if that new policy or endorsement will cause it to lose its existing Creditors’ Rights endorsement?
1. The old lender’s policy stays in effect so long as the lender, or its subsidiary has an interest in the subject property. ALTA Loan Policy 2006 provides, in relevant part:
2. Need insurance over a Court Order in Maryland vs. D.C. (D.C. has no judicial oversight over commercial foreclosures.), to be sure that the foreclosure was properly performed.
3. Insured bring-to-date, as distinguished from just a title report.
4. The dollar limits of the old policy may be low in relation to today’s value.
5. Whether, with the passage of time, the old Creditors’ Rights endorsement still has any value?