Regaining Lost Commercial Real Estate after Bankruptcy

If you are in default on your commercial real estate mortgage and you file for bankruptcy, your lender is prohibited from filing a foreclosure action against you during the bankruptcy proceedings.  In fact, all your creditors are prohibited from starting or continuing any type of judicial action against you to collect a debt.  Even if your lender already filed a foreclosure action before the bankruptcy, the bankruptcy temporarily stops the foreclosure sale.   A Chapter 7 bankruptcy gives you time to sell all your assets and pay off your debts.  A Chapter 13 bankruptcy gives you time to negotiate a reduction in debt with your creditors, including your lender, and enter into a court-approved payment plan with them.

Other Ways to Get Your Property Back

After bankruptcy, you may still be able to redeem your commercial real estate if it has been sold at a foreclosure sale by paying the sales price, interest and any other fees and costs to the new owner, providing your state laws allow redemption.  Some states allow the previous owner to redeem their property within six months to one year after the foreclosure.  You should check your state statutory foreclosure redemption laws or speak with a real estate foreclosure attorney. 

You could also file a wrongful foreclosure action if you believe your lender acted illegally when they foreclosed or committed a violation of the mortgage lending laws.  A good foreclosure defense attorney can review your commercial loan documents to see if there are any irregularities to use as a defense in a wrongful foreclosure.  Your attorney may be able to get the foreclosure set aside so you can get your property returned to you. 

Chapter 13 Repayment Plan 

When you enter into a Chapter 13 bankruptcy plan, you can keep your assets, including your commercial real estate.  The reason is because you are agreeing to enter into a court-approved repayment plan with your creditors.  So if you have a mortgage on your commercial real estate, you and your lender can reach an agreement so that you can keep your property by making reduced payments.  Generally the court will order the lender to reduce your principal or to give you a mortgage modification.  You can also enter into a repayment plan with your other creditors.  Typically, a Chapter 13 repayment plan takes 3-5 years to complete.  Once you have completed the plan, the court will discharge the bankruptcy.  Any unsecured debt remaining will also be discharged. 

Hire an Attorney

If you are contemplating bankruptcy and you own commercial real estate, you should hire a bankruptcy attorney/foreclosure defense attorney for advice. Bankruptcy and foreclosure laws are complicated, and the attorney can discuss the different kinds of bankruptcy Chapters you may be eligible to file under and how to retain or get back your property.  The attorney can represent you in court.