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CH 11 - how to deal with hard money secured lender in CH 11
Debtor obtained a hard money loan online for $150K prior to filing BK. The
lender filed a UCC-1. There was a "bait and switch". Emails to debtor say
that the loan is unsecured, with no personal guaranties. Debtor ended up
signing a loan that was secured with a blanket lien on all assets, and with
personal guarantees.
Lender did not appear at the cash collateral hearing. When I spoke to them
about a week in they said they hadn't assigned an attorney yet. They seemed
uninterested in the case. I have heard nothing from them 5 weeks in now.
They are junior to another secured lender who is involved in the case. We
want to pay off the senior secured lender as soon as we can (only $50K
owed). On date of filing, the debtor had $30K in cash and was owed about
$60K in receivables. The only assets other than the cash and receivables
are trucks and trailers. Neither secured lender has a perfected security
interest in the trucks or trailers. We have a stip with the senior secured
lender for replacement liens and adequate protection payments.
Michael Avanesian previously directed me to: In re Premier Golf Properties,
LP, 477 BR 767 - Bankr. Appellate Panel, 9th Circuit 2012 which suggests
that the UCC-1 may not attach to postpetition receivables.
Can I treat this junior lender as unsecured, or would they be secured up to
$40K (in prepetition receivables mentioned above: $90K cash and receivables
less $50K senior secured lien = $40K)? What about the bait & switch? This
is a small business owner so they probably should have been more
sophisticated when they signed the loan docs, but weren't because they had
assurances via email re what the deal was. I am just wondering if we pay
off the senior secured lender if we have to stick to the cash collateral
budget as closely if the junior lender is not taking an active role in the
case and if they are fraudsters.
Holly Roark
Certified Bankruptcy Specialist*
*and Sports Lawyer*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
*Central District of California & District of Idaho* - Consumer Bankruptcy
Attorney
1875 Century Park East, Suite 600 Los Angeles, CA 90067
T (310) 553-2600; F (310) 553-2601
*By State Bar of California Board of Legal Specialization
Debtor obtained a hard money loan online for $150K prior to filing BK. The lender filed a UCC-1. There was a "bait and switch". Emails to debtor say that the loan is unsecured, with no personal guaranties. Debtor ended up signing a loan that was secured with a blanket lien on all assets, and with personal guarantees.Lender did not appear at the cash collateral hearing. When I spoke to them about a week in they said they hadn't assigned an attorney yet. They seemed uninterested in the case. I have heard nothing from them 5 weeks in now.They are junior to another secured lender who is involved in the case. We want to pay off the senior secured lender as soon as we can (only $50K owed). On date of filing, the debtor had $30K in cash and was owed about $60K in receivables. The only assets other than the cash and receivables are trucks and trailers. Neither secured lender has a perfected security interest in the trucks or trailers. We have a stip with the senior secured lender for replacement liens and adequate protection payments.Michael Avanesian previously directed me to:In re Premier Golf Properties, LP, 477 BR 767 - Bankr. Appellate Panel, 9th Circuit 2012 which suggests that the UCC-1 may not attach to postpetition receivables.Can I treat this junior lender as unsecured, or would they be secured up to $40K (in prepetition receivables mentioned above: $90K cash and receivables less $50K senior secured lien $40K)? What about the bait & switch? This is a small business owner so they probably should have been more sophisticated when they signed the loan docs, but weren't because they had assurances via email re what the deal was. I am just wondering if we pay off the senior secured lender if we have to stick to the cash collateral budget as closely if the junior lender is not taking an active role in the case and if they are fraudsters.
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