December 22, 2016
When a bankruptcy case that involves commercial property, a question that often becomes a key issue is whether an assignment of rent is property of the bankruptcy estate. Most of the bankruptcy rulings in Michigan have held that prepetition assignment of rent remains property of the Debtor’s bankruptcy estate. See In re Newberry Square, 175 BR 910 (Bankr ED Mich, 1994). This issue can turn on whether the controlling state law follows a lien theory or title theory for mortgages. See In re Builders Group & Dev. Corp., 502 BR 95, 109 (Bankr. DPR, 2013). Michigan, like a majority of states, follows the lien theory and as a result case law in Michigan bankruptcy matters have found that prepetition assignment of rent remains property of the estate.