Trustee Alleges That Debtor Sold Its Most Valuable Asset In The Middle Of Its Bankruptcy Case
More than half of businesses close permanently within their first five years; the percentage of businesses that continue operating for many years are the exception rather than the rule. Some of the companies that have been in operation for a long time are only still around because they have filed for bankruptcy protection at least once; filing for bankruptcy protection when appropriate is the right of individuals as well as companies. Whether the debtor is a person or a business, the court will only accept the bankruptcy filing if the debtor has been honest. Shady dealings, such as getting rid of assets quickly so they won’t be a factor in your bankruptcy case, can tank bankruptcy cases, especially for businesses. You can sell your real estate properties at a loss or file for bankruptcy in order to keep them, but not both. If you are struggling to pay for your commercial real estate properties, contact a Plantation real estate bankruptcy lawyer.
Bankruptcy Trustee Alleges Fraudulent Transfer of Warehouse
At the beginning of the COVID-19 pandemic, a company called 98 SE7 LLC was struggling to keep up with mortgage payments on a warehouse it owned in Deerfield Beach; it was nearly a year behind on payments. In June 2020, it sold the warehouse to another company, Industrial Real Estate, which is based in Wyoming. Even though the building had recently been appraised at $1.48 million, the sale price was only $100. Industrial Real Estate immediately began to lease spaces in the warehouse to tenants. The transfer took place right after the mortgage lender had withdrawn its petition to foreclose on the property, and 98 SE7 LLC had just refinanced its mortgage. Neither 98 SE7 LLC nor Industrial Real Estate paid any taxes in connection to the sale. Before and after the transfer, the warehouse rented out spaces to ecommerce businesses, especially those related to the events industry.
In September 2020, 98 SE7 LLC filed for chapter 11 bankruptcy. It listed the Deerfield Beach warehouse as one of its assets. As for its debts, the biggest one was the $1.5 million it owed on the mortgage of the warehouse, and the second largest was a line of credit it owed to PNC Bank.
The bankruptcy trustee became suspicious when Industrial real estate attempted to take out a loan for the Deerfield Beach warehouse. In June 2021, the bankruptcy trustee filed a lawsuit against 98 SE7 LLC, alleging that the transfer of the property to Industrial Real Estate was fraud and that the purpose of the transfer was to deprive the bankruptcy estate of assets it could use to satisfy the bankruptcy estate’s debts. The bankruptcy trustee also asked the court to stop Industrial Real Estate from collecting rent payments from tenants while the bankruptcy case is pending.
Contact a South Florida Debt Lawyer About Real Estate Bankruptcy
A South Florida bankruptcy lawyer can help you with complicated situations like selling a real estate property shortly before or after your company filed for bankruptcy. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.