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AUTOMATIC STAY AND CLAIMS. PREVENTS ANYONE FROM INTERFERING WITH DEBTOR’S PROPERTY OR EFFORTS TO REORGANIZE. Includes: Commencement or continuation of lawsuit Enforcement of judgments (monetary or otherwise) Obtaining possession of property of estate Collection efforts Set off of debts.
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PREVENTS ANYONE FROM INTERFERING WITH DEBTOR’S PROPERTY OR EFFORTS TO REORGANIZE Includes: Commencement or continuation of lawsuit • Enforcement of judgments (monetary or otherwise) • Obtaining possession of property of estate • Collection efforts • Set off of debts
Evict tenant Lockout tenant Seize tenant’s property Shut off utilities Show property to prospective tenant Apply security deposit Hinder operation of debtor’s business Change locks Give eviction notice Terminate lease Declare a default Threaten tenant Move property of a tenant that has vacated STAY’S EFFECT ON LANDLORD/TENANT RELATIONYou cannot:
You Can: Collect rent and other charges which have accrued since bankruptcy filing Draw down letter of credit Take action to continue a security interest in property Take action to remove tenant whose lease has expired by its own terms prior to or during the bankruptcy case (this should be done carefully) STAY’S EFFECT ON LANDLORD/TENANT RELATION
Contempt Fine / Damages / Attorney Fees Imprisonment Bad reputation with Court It is just like violating Court injunction. VIOLATIONS OF STAY
WHY FILE A CLAIM? • Only way to get paid • Previous suits, judgments, awards, etc. Make no difference
LANDLORD CLAIMS • Secured – Extent defined by lease. Very rare • Unsecured – Most common • Administrative – Post-petition expense. Highest priority • Prior to rejection • After rejection • Property Tax / Expenses – • Pro-rated • Environmental – Did claim arise pre-petition or post-petition?
SOURCES OF PAYMENT • Post confirmation operations of debtor • Sale of property • Recoveries from lawsuits filed on behalf of estate • Fraudulent conveyances • Preferences • Turnover suits • Business tort and related suits
CALCULATION OF CLAIM AMOUNT – PRE-PETITION Include: • All pre-petition amounts owed • All pre-petition reconciliations, if available • All other pre-petition damages to the property Credit: • Security deposition (provisionally)
CALCULATION OF “REJECTION DAMAGES” • Calculate whatever damages are for breach under the lease • Cap the damages at equivalent of one year’s rent reserved in lease Or • Cap the damages at the rent reserved for 15% of the remaining time under the lease not to exceed three years i.e., (10 years x 15% = rent for 1.5 years) (7 years x 15% = rent for 1.05 years) • All amounts are subject to mitigation if new tenant takes possession
*Debtor may be entitled to credit of $20,466.87 for pre-petition rent due if application of security deposit is approved by court.
$21,359.60 $702.00 $174,770.16 Prepetition rent and charges (including late fees) from March 2000 to July 10, 2000Unpaid post-petition administrative chargeEstimated damages arising from potential rejection of lease pursuant to 11 USC § 502(b)(6) (One year of rent)