Single Asset Real Estate Bankruptcy: Chapter 11 Options and Deadlines

Under 11 U.S.C. § 101(51B), SARE involves a single property or project generating substantially all of the debtor's gross income, with no substantial business beyond operating the property and incidental activities. The definition excludes residential property with fewer than four units and debtors who are family farmers.

Ownership records, leases, revenue statements, and operating records help establish those facts. Several parcels may constitute one project, while substantial business activities beyond property operations may affect classification. Neither parcel count nor the owner's description of the business settles the question.

The property owner's legal identity determines whose assets and obligations enter the case. An LLC's filing generally does not extend the automatic stay to its members or personal guarantors.

Before a bankruptcy filing, an attorney reviews ownership, filing authority, venue, guarantees, and available funding. Chapter 7 liquidation may warrant comparison when reorganization lacks financial support, but it does not provide a Chapter 11 property retention plan.

Section 362(d)(3) generally sets the deadline at the later of 90 days after entry of the order for relief or 30 days after the court determines that SARE treatment applies. The court may extend the 90-day date for cause through an order entered within that period.

The debtor must submit a plan with a reasonable possibility of confirmation within a reasonable time. The deadline does not require completed confirmation, but a proposal without credible funding or workable creditor treatment may fall short.

The alternative requires monthly payments based on the nondefault contract interest rate and the value of each qualifying creditor's interest in the property. The statute excludes claims secured by judgment liens or unmatured statutory liens from this payment requirement.

These payments may differ from the scheduled mortgage payment. An attorney must review the loan terms, valuation, and payment records before relying on this option.

Missing the requirement does not itself automatically terminate the stay under § 362(d)(3). A creditor request and court proceedings are involved. Compliance also does not defeat other grounds for stay relief, which may require separate bankruptcy litigation.

An attorney reviews financial records with valuation and accounting professionals to determine whether the proposed payments fit the property's economics.

Reviewing loan agreements and disputes can also identify contested charges or terms that affect negotiations.

Negative equity does not automatically entitle the debtor to remove a junior lien. Valuation, claim treatment, creditor elections, and confirmation requirements affect whether and how a plan can modify secured obligations.

A claim secured only by the debtor's principal residence is subject to the modification restriction in § 1123(b)(5). Commercial property restructuring should therefore remain separate from general promises of home mortgage reduction.

Rents subject to a creditor's interest may constitute cash collateral. General operating use ordinarily requires creditor consent or court authorization.

Section 362(d)(3) permits qualifying monthly payments from property rents or income notwithstanding § 363(c)(2). That specific exception does not authorize other spending. Review the cash collateral arrangements before using rental receipts for repairs, distributions, or unrelated expenses.

A refinancing proposal needs evidence of lender requirements, underwriting progress, and a realistic closing schedule. Preserve lender correspondence and identify unresolved conditions.

An anticipated increase in property value or an informal financing discussion may not support the proposed plan. Address funding gaps before making refinancing the sole route to repayment.

The special SARE deadline does not set the duration of the case. Classification disputes, valuation, financing, creditor negotiations, and confirmation proceedings affect timing. Plan payments may continue after confirmation.

A debtor whose primary activity is owning single asset real estate is excluded from the small business debtor definition used for Subchapter V eligibility. A low debt balance alone does not overcome that exclusion.