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

  • “This firm is one, if not the top firm in the Southeast. I steer all my work to Burr & Forman exclusively. I have used other attorneys on deals where conflicts may arise and those are good firms, but I still go back to Burr time and again.”

    - Chambers 2012

  • “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

  • "He has a depth of knowledge and understanding of the transaction so he's in a position to help solve any problems that may arise. I like working with people that try and get transactions done."

    -Chambers 2013

  • "...He’s terrific to work with – a very good negotiator. He is outstanding and not aggressive, which is one of the things I like about him. He is calm, factual, extremely sharp, and observant. He doesn’t miss a beat. On a very complex negotiation, we made a lot of headway due to him."

    -Chambers 2012

  • “I work with a lot of lawyers in several states and Greg Harley is one of my favorites; he makes my job easy. He is very efficient, responsive and gets good results for us. I am very pleased.”

    -In-house counsel for a national banking institution