A recent bankruptcy decision makes clear that it is risky for a landlord to file a proof claim in a bankruptcy proceeding when the landlord has substantial security in the form of both a security deposit and letter of credit.
Landlord's Claim in Bankruptcy Case Puts Its Letter of Credit Proceeds At Risk
If a landlord has drawn down the letter of credit proceeds and withdrawn the security deposit in full after the tenant's default, filing a proof of claim in the tenant's subsequent bankruptcy proceeding may invite a bankruptcy court's consideration of whether those funds are or should be assets of the bankruptcy estate.
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