A strategy by a Nevada real estate company may set a new precedent for investors attempting to reorganize under Chapter 11 bankruptcy protection. According to the National Real Estate Investor, by merging several single-asset operating companies, Whitton Corp. has avoided onerous restrictions that federal bankruptcy law places on property owners with only one asset. The U.S. bankruptcy court has allowed Whitton to file, even though most of its creditors claim they showed bad faith by merging the day before.
The merger changed Whitton into a multi-asset owner from a group of single-asset operating companies, limiting each mortgage lender’s ability to block the reorganization and foreclose on properties used as collateral. Under the U.S. bankruptcy code, single-asset property owners are affected when filing for bankruptcy protection with a measure that establishes a 90-day deadline to either file a reorganization plan, or to begin making regular interest payments on the principal balance owed on the loan.
To read the full article from the National Real Estate Investor, click here.