Magazine article The RMA Journal

Court Grants Lender Relief from Stay in Bankruptcy Case

Magazine article The RMA Journal

Court Grants Lender Relief from Stay in Bankruptcy Case

Article excerpt

IN MARCH 2006, a developer of a dry stack boat storage facility in Dania, Florida, borrowed $8.74 million from Florida Community Bank. A mortgage and assignment of rents was duly recorded in Broward County and a UCC-1 financing was recorded in the Florida Secured Transaction Registry.

The debtor defaulted in October 2006 and the bank proceeded with a mortgage foreclosure lawsuit. Final judgment in favor of the bank was entered on May 23, 2007, with a foreclosure sale set for July 25, 2007.

On the date of the foreclosure sale, the debtor and the bank executed a forbearance agreement. The forbearance agreement quite clearly provided that if the debtor filed for bankruptcy protection, the bank was entitled to relief from the automatic stay. The debtor's bankruptcy counsel was present when the forbearance agreement was signed. The foreclosure sale was rescheduled to September 26, 2007, and the judge in the foreclosure case approved the agreement.

On September 25, 2007, the debtor filed a petition for Chapter 11 relief. On October 12, 2007, the bank moved to vacate the stay. The court stated (1) that there were four principal (but not exclusive) factors to be taken into account in deciding whether to grant the bank's request for relief, relying on In re Desai, 282 B.R. 527 (S.D. Ga. 2002), and In re Sky Group International, Inc., 108 B.R. 86 (W.D. Pa. 1989): 1) the sophistication of the debtor, 2) the consideration provided by the creditor, 3) whether other parties will be affected, and 4) the feasibility of a plan of reorganization proposed by the debtor. …

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