In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act made substantial changes to the administration of bankruptcy cases that involve single asset real estate (“SARE”) matters. Most notably, the 2005 Act greatly expanded the applicability of the SARE rules. Before the 2005 Act, the SARE provisions did not apply if the property’s value exceeded $4 million. The 2005 Act eliminated this $4 million cap and, as a result, the SARE provisions are now applicable to a larger number of real estate cases.
The elimination of this cap coupled with the economic downturn of 2007 to 2009 has increased the importance of the SARE provisions in bankruptcy cases. Classifying a debtor’s bankruptcy case as a SARE case greatly favors lenders by reducing the amount of time the debtor can spend in chapter 11. This Alert summarizes the key SARE provisions and provides a framework for dealing with issues that arise in SARE bankruptcy cases.
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