Mastan v. Salamon, No. 15-60031 (9th Cir. 2017)
Annotate this CaseIn this bankruptcy appeal, the issue presented for the Ninth Circuit’s review was one of first impression regarding some key provisions of 11 U.S.C. 1111(b) that apply to Chapter 11 proceedings for those who hold non-recourse liens on real property who are granted recourse against the bankruptcy estate upon the filing of the bankruptcy petition. Those protected are creditors who have “a claim secured by a lien on property of the estate.” The issue before the Court was whether the creditor continues to have a right of recourse after there has been a non-judicial foreclosure, so that the property is no longer part of the estate and the liens have been extinguished. The Bankruptcy Appellate Panel (“BAP said no and the Ninth Circuit affirmed.
Court Description: Bankruptcy. The panel affirmed the Bankruptcy Appellate Panel’s decision affirming the bankruptcy court’s order disallowing a claim in a Chapter 11 case. Under 11 U.S.C. § 1111(b), those who hold non-recourse liens on real property are granted recourse against the bankruptcy estate upon the filing of the bankruptcy petition. Those protected are creditors who have “a claim secured by a lien on property of the estate.” The panel held that a creditor does not continue to have a right of recourse after there has been a non-judicial foreclosure, so that the property is no longer part of the estate and the liens have been extinguished. IN RE SALAMON 3
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