Burr Alert: Rent Assignments in Bankruptcy: An Eleventh Circuit Analysis

August 28, 2012

The Bankruptcy Code1 is designed to protect a debtor from creditor actions while the debtor reorganizes its financial affairs or makes a fresh start. To assist the debtor in its efforts to reorganize, the Code also generally prohibits the creation of any new liens,2 and allows the debtor to acquire new property without the imposition of existing liens.3 A creditor cannot generally attach a pre-petition lien to property acquired after the petition date, which property should be available to the debtor to fund the reorganization. However, Congress carved out an exception to this rule for proceeds, products, offspring, profits, and rents.4 Section 552(b)(2) of the Bankruptcy Code allows a creditor with a perfected security agreement in pre-petition property to also have a security interest in any “amounts paid as rents of such property” after the filing of the bankruptcy petition. If the debtor executed an assignment of rents in conjunction with a mortgage on the property, the lender may have a lien interest or other entitlement in the rents generated from the property during the bankruptcy case, in addition to its mortgage interest in the property.

To read more about this topic, please see full alert below

Download PDF



Legal Disclaimer:
No representation is made that the quality of services to be performed is greater than the quality of legal services performed by other lawyers.
send article

TESTIMONIALS

  • "Burr & Forman handles some of our more complicated litigations and special assets work. They did an excellent. They're people we go to whenever cases are complex. They provide good value for money; there's nothing I would change about them."

    -Chambers 2013

  • “I have worked with Lauren for quite a while and have found her to be very responsive and knowledgeable.  She has made every effort to assist me and my company in the most professional manner.  She has given me sound and solid guidance on some very difficult and sensitive issues that has proved to be in my company's best interest.  It has always been a pleasure to work with Lauren.”

    -Jillian M Siress, Vice-President, Reliance Trust Company

  • “She is very competent in advising us on the deal – many of us didn’t realize the significance or the terminology. She is very thorough and is very good at explaining how the deals worked and what it was.”

    -Chambers 2012

  • "Erich is great to work with.  He has a responsiveness that is second to none.  He and his team are always focused on obtaining the best outcome for their clients in a timely and cost efficient manner.  He is experienced, hard working, client minded, professional, and just an all around great attorney."

    -Anonymous

  • “As a banker working out troubled loans, I really appreciated Keith's ability to help me with my legal issues, but I really valued his ability to help me understand the full spectrum of responses available to me as well as describe the pros and cons of each option. Keith's value as an attorney is amazing, but is far surpassed by his ability as a trusted advisor.”

    -Rebecca York, Mercantile Bank