To Declare, or Not to Declare Bankruptcy?
By Lauren Elkies Schram
November 11, 2015
3) It allows a property owner to get better terms. Once a bankruptcy is underway, they “have the option to pay back the bank on better terms,” [an attorney] said.
“The bankruptcy…mitigates risks,” said [an attorney]. “The bankruptcy court is in place to afford debtors a fresh start, and so in the context of a bankruptcy proceeding the owner communicates with the creditors and hopefully can strike a deal that’s better than losing everything.”
Even if an owner is underwater, said William Geller, a bankruptcy attorney with Adam Leitman Bailey, P.C., they may come out with equity.
Indeed, a filer can make bank in bankruptcy court. They could sell the property at a bankruptcy auction for a lot more than the loans, liens and judgments, Mr. Geller said.
He said he is representing a creditor in the case of a property owner who tried to sell the building for about $30 million, but failed due to competing claims against it. In bankruptcy court, however, the owner was able to sell it for more than $40 million.
6) A developer may be able to keep their project alive. If there is a loan that comes due and the developer is unable to refinance it, “you can buy time to pay it back, or restructure the loan,” so that it doesn’t impact the entire project, Mr. Geller said.