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Category: Bankruptcy Law
Satisfied Customers: 17223
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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My California C corp owns a commercial building... purchased

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My California C corp owns a commercial building... purchased for 2.3 million and financed with CIT. Haven't had funds to pay mortgage last 9 months... CIT is proceeding with foreclosure and auction is scheduled for Nov. 12. I have an attorney that is filing Chapter 11 this week to stop foreclosure and then work with CIT for mortgage modification.


Will Chapter 11 stop foreclosure.. if so for how long? One of my tenants has been told by CIT that Chapter 11 won't stop foreclosure and that her options are to leave premises within 15 days after auction or she can purchase building for 2 million.

Filing Chapter 11, and chpater 13 and 7 will stop a foreclosure, however, filing it to avoid foreclosure is a complicated, especially if the mortgage in question is the only significant debt that creditors are trying to collect.

The automatic stay will last for as long as the case proceeds, however if rejected could be less than three months.
Customer: replied 7 years ago.
What does complicated mean? The mortgage is the only asset owned by my corporation but funds aren't available to pay back mortgage or start paying it now... we need a modification as the value has dropped about 50%. I have 2 tenants in building that are worried they will get kicked out.

Would the person who buys building in auction have to honor existing leases on building or can they get kicked out? What recourse do tenants have?
under new foreclosure the tenants can stay as long as their leases allow, also, when you file the bankruptcy the creditors will object to you reorginzation in most cases the secured creditor will work out some type of agreement prior to the filing, the threat of a filing may work for you as much as the filing, but during the actual case, the trustee will have to see that you will have the money to pay off any other debts, and the current mortgage. It will not force the bank to modify your loan
Customer: replied 7 years ago.
So if both tenants have leases that don't expire until June of 2018, are they able to stay even if there is an auction and a new owner buys in auction?? My main concern is the tenants not getting evicted, not so much me retaining ownership of building... as building is worth about 1.3 million now and I paid 2.3 for it in 2006.
If the tenants are residential renters they are protected if they are stores, in the building they can be evicted.

The basic rule for commercial leases in foreclosure is called "first in time, first in right." If the mortgage was recorded before the lease was signed, the general rule is that the lease is wiped out.

This allows the new owner of the property to do with it as they please -- typically sell it, lease it to the current occupants or lease it to someone else. The new owner can evict the current tenant (even if the tenant has fully complied with their lease), but typically must get court permission to do so.

Some leases (or agreements accompanying leases) contain subordination, non-disturbance and attornment clauses. Attornment means agreement to remain as a tenant with a new landlord.

Title VII of the Helping Families Act (the “Act”) is entitled “Protecting Tenants at Foreclosure” and generally requires the immediate successor-in-interest on foreclosed property to recognize the lease rights of existing tenants on the property.

The Act applies to any property where there has been a foreclosure on a “federally-related mortgage loan or on any dwelling or residential real property” after May 20. “Federally-related mortgage loan” is defined in RESPA as being limited to mortgages on property “designed principally for the occupancy of from one to four families.” Therefore, the Act’s requirements apply only to residential, and not commercial, property.

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