Understanding Section 363 Sales Out of Bankruptcy and the Effect on the Commercial Real Estate Market and Title Insurance
Bankruptcy filings have surged in 2023 and have had a significant impact on the commercial real estate market.
Bankruptcy filings in the U.S. surged in the first half of 2023. Chapter 11 bankruptcy filings jumped 68% during that time compared to the same period the year earlier (from 1766 commercial Chapter 11 bankruptcies to 2,973). Individual Chapter 13 filings also saw a 23% jump during the same period. Bankruptcy filings for small businesses, categorized as Subchapter V elections within Chapter 11, jumped 55%, according to the data.
The growing number of companies that have filed for bankruptcy so far this year saw a significant increase. According to Epiq AACER, 3,016 commercial companies have filed for Chapter 11 bankruptcy this year. That is a 34% increase from the 2,247 filings in the same period last year. Small businesses have been hit the hardest so far, with a 61% increase in the first half of 2024 and 1,176 small businesses filing for bankruptcy.
Analyst reports and the current dynamics indicate that, followed by a quick deflation – a renegotiation of the $2.9 trillion in commercial mortgages due in the next two years – a financial crisis affecting the commercial real estate market is on the horizon.
This white paper will:
- Give a detailed review of Section 363 sale of an asset out of bankruptcy.
- Discuss options for borrowers with distressed commercial real estate properties.
- Review the advantages of a Section 363 sale to the debtor and parties.
- Provide insight into how a Section 363 court order impacts the time frame for closing.
- Considerations taken by title companies on these kinds of transactions.
Download the white paper to read this detailed review of Section 363 sales.