L.A. Bankruptcy Attorney Resolves Investors’ Inability to Service Debt

According to Los Angeles attorney ""Jerome S. Cohen"":http://jscbklaw.com/page_contact.html, a chapter 11 specialist, many investors have found themselves unable to service debt due to vacancies, tenant defaults, and other problems that have arisen as a result of the struggling economy.

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However, banks are highly motivated to turn problems into performing loans, and Cohen says there is an opportunity to find creative solutions to this increasingly common issue.

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One such case, involving seven commercial properties in California and New York, was recently resolved by Cohen. The client had built a large, valuable portfolio of properties with financing from nine different banks, including JP Morgan Chase, CitiMortgage, IndyMac, and Union Bank.

As part of the settlement, the U.S. Bankruptcy Court reduced the loan principal by over $2.5 million and reduced the interest rates on the remaining balance. This enabled the investor to keep the properties, which will now generate positive cash flow.

Cohen said the settlement was accomplished using provisions of the Bankruptcy Code, which allows a ""stripdown"" of under-secure mortgages and ""cramdown"" procedures to force the result upon all creditors. He said this can be a very complex effort, especially when so many creditors are involved.

In addition, Cohen was able to resolve a case for a client who held only 10 percent interest in a company by obtaining court orders ousting the 90 percent holder and installing the client as business manager. He has been practicing bankruptcy laws for 20 years and is board certified in business bankruptcy, a certification held by very few attorneys.