[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Pages E15-E16]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               SINGLE ASSET BANKRUPTCY REFORM ACT OF 1997

                                 ______
                                 

                          HON. JOE KNOLLENBERG

                              of michigan

                    in the house of representatives

                        Tuesday, January 7, 1997

  Mr. KNOLLENBERG. Mr. Speaker, I rise today to introduce a bill that 
addresses an injustice that exists within title 11 of the United States 
Code regarding single asset bankruptcies. This is the same language I 
introduced during the 104th Congress as H.R. 2815. My understanding is 
that the Judiciary Committee will include this measure in their 
technical corrections bill; however, I am introducing this bill as 
stand alone legislation to highlight the importance of this specific 
provision. I also understand that the Bankruptcy Commission has placed 
a particular focus on single asset bankruptcy and they recently held 
hearings in Washington, DC, to discuss this important issue.
  The injustice within title 11 stems from an 11th hour decision made 
during the 103d Congress, which placed an arbitrary $4 million ceiling 
on the single asset provisions of the bankruptcy reform bill. The 
effect has been to render investors helpless in foreclosures on single 
assets valued over $4 million.
  My bill will rectify this problem, by eliminating the $4 million 
ceiling, thereby allowing creditors to recover their losses. Under the 
current law, chapter 11 of the Bankruptcy Code becomes a legal shield 
for the debtor. Upon the investor's filing to foreclose, the debtor 
preemptively files for chapter 11 protection which postpones 
foreclosure indefinitely.
  While in chapter 11, the debtor continues to collect the rents on the 
commercial asset. However, the commercial property typically is left to 
deteriorate and the property taxes go unpaid. When the investor finally 
recovers the property through the delayed foreclosure, they owe an 
enormous amount in back taxes, they receive a commercial property left 
in deterioration which has a lower rent value and resale value, and 
meanwhile, the rent for all the months or years they were trying to 
retain the property went to an uncollectible debtor.
  My bill does not leave the debtor without protection. First, the 
investor brings a foreclosure against a debtor only as a last resort. 
This usually comes after all other efforts to reconcile delinquent 
mortgage payments have failed. Second, the debtor has up to 90 days to 
reorganize under chapter 11. It should be noted, however, that single 
asset reorganizations are typically a false hope since the

[[Page E16]]

owner of a single asset does not have other properties from which he 
can recapitalize his business.
  Finally, Mr. Speaker, my bill helps all American families by making 
their investments more secure and more valuable. The hardworking 
American families who depend on their life insurance policies and who 
have paid for years into their pensions will save millions in reduced 
costs. My bill protects the little guy from being plagued with years of 
litigation while a few unscrupulous commercial property owners continue 
to collect the rent to line their own pockets.

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