The United States Bankruptcy Appellate Panel of the 6th Circuit affirmed the Bankruptcy Court dismissal of five single – asset real estate Debtors' Jointly Administered Chapter 11 cases under the "For Cause" dismissal provisions of the United States Bankruptcy Code, 11 U.S.C.A. § 1112 (b). see In re Creekside Senior Apartments, LP, et al., 2013 WL 1188061 (6th Cir. BAP Ky.)
The Debtors appealed from the bankruptcy court determination which dismissed five single asset real estate cases. Each Debtor owned a parcel of real property on which it operated a low-income housing apartment complex. In order to demonstrate that cause exists to dismiss a case the moving party must demonstrate that there is both a (1) substantial or continuing loss or diminution of estate assets and (2) an absence of a reasonable likelihood of rehabilitation.
The Bankruptcy Court did not abuse its discretion in determining that there was a continuing loss to or diminution of estate assets and that there was no reasonable likelihood of rehabilitation. The Debtors' own financial projections demonstrated that they would have negative cash flows at least through 2020 and the value of the real estate holdings that secured the Secured Creditors claims where declining. The Debtors were unable to service their debt at the beginning of the case and remitted over a period of two years a mere $15,000.00 in adequate protection payments to the secured creditor. The secured creditor's combined secured claims exceeded $4.3 million. The Bankruptcy Court had ample evidence to support the determination that the Debtors did not have a reasonable likelihood to reorganize and thus based upon the continued loss and diminution of estate assets the Bankruptcy Courts dismissal for cause was affirmed.
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