When a company that owns a single commercial property files for Chapter 11, the decisive moment often comes long before plan confirmation, in the order that permits the debtor to use its lender’s rents. At Murray | Lobb Attorneys, we have represented financial institutions, businesses, and real estate investors in Texas since 1991, and we have seen how the terms of a cash collateral order shape everything that follows. The deadlines negotiated in that order, more than any plan the debtor later proposes, usually determine whether the property is sold, refinanced, or foreclosed. A recent Galveston County bankruptcy involving the Mall of the Mainland in Texas City shows how quickly those deadlines can decide a case.
What Is Cash Collateral?
Cash collateral includes cash, rents, deposit accounts, and similar proceeds that a creditor holds a security interest in. For a single-property debtor, it is usually the building’s rent stream.
In most Chapter 11 cases, the business stays in control as a “debtor in possession” and takes on a trustee’s rights and duties. Under 11 U.S.C. § 363(c)(2), that means the debtor may not use cash collateral unless the secured creditor consents or the court authorizes it after notice and a hearing. Before the court will authorize use over the lender’s objection, the debtor must show that the lender’s interest is adequately protected, as Sections 363(e) and 363(p) require. For a business whose only income is rent, losing access to that cash can end the case within days.
Why Do Lenders and Debtors Negotiate Agreed Orders?
Contested cash collateral hearings are expensive and uncertain for both sides, so many single-asset cases begin with an agreed order.
In exchange for consent, lenders typically require some combination of:
- A budget limiting how the debtor spends the rents
- Periodic adequate protection payments
- Replacement liens on post-petition revenue
- Milestones, such as deadlines to hire a broker, sign a sale contract, obtain a refinancing commitment, or close a transaction
- Default remedies, including stay relief, dismissal, or conversion if a milestone is missed
The milestones are the heart of the deal, turning an open-ended reorganization into a timed process with consequences the debtor has already accepted.
A Recent Galveston County Example: The Mall of the Mainland
JMK5 Mall of the Mainland, LLC filed for Chapter 11 relief in the United States Bankruptcy Court for the Southern District of Texas on June 2, 2026. Its main asset was the former Mall of the Mainland shopping center in Texas City, now known as Mainland City Centre, which secured more than $8.6 million owed to Plains State Bank, along with PACE financing tied to PACEWell 3, LLC and Galveston County.
Early in the case, the debtor and the bank agreed to an order allowing the debtor to keep operating on the bank’s rents, subject to a firm deadline. By September 2, 2026, the debtor had to sign a qualified earnest money contract or obtain a binding refinancing commitment. If neither happened, the case would convert to Chapter 7 automatically, with no further motion needed.
The debtor did find a buyer at a price above the order’s $13 million floor. But the order required a qualified contract: fully binding, free of closing contingencies, and large enough to pay all liens and administrative claims while leaving at least $100,000 for general unsecured creditors. The proposed contract was signed only by the buyer, remained subject to court approval, competing bids, and a due diligence termination right, and, once liens and professional fees were accounted for, essentially left nothing for unsecured creditors.
At the September 2 hearing, the debtor withdrew its motion to sell. Under the terms of the cash collateral order, the court converted the case to Chapter 7 on September 3; a trustee now administers the estate, and the first-lien lender is expected to post the property for foreclosure. As Murray | Lobb attorney Kyle Dickson observed, a single-property Chapter 11 often turns on the negotiated cash collateral order rather than a confirmed plan, and a deal that arrives late or falls short of the agreed terms will not stop the clock.
Lessons for Lenders and Creditors
For secured lenders, the takeaway is that the cash collateral order is the best opportunity to set the case timeline. Clear milestones with defined terms, such as what counts as a “qualified” contract, reduce later disputes. Self-executing remedies, like automatic conversion or stay relief upon default, avoid the delay of a fresh contested motion. Lenders should also confirm that the order addresses other lienholders, including taxing authorities and PACE lenders, whose claims affect what a sale must generate.
A creditor rights attorney can help a lender decide which protections to demand, draft milestone language that will hold up in court, and enforce the order promptly if the debtor falls short.
Lessons for Property Owners Considering Chapter 11
Owners should treat every milestone as a hard deadline. Agreeing to an aggressive timeline to keep access to rents may be necessary, but owners should be realistic about how long marketing, due diligence, and financing actually take. A signed contract that does not meet the order’s definition will not satisfy it. The Mall of the Mainland debtor had a buyer in hand and still lost control of the case because the contract did not satisfy the order by the deadline.
Owners of property that qualifies as single asset real estate also face a separate statutory deadline. Under 11 U.S.C. § 362(d)(3), the court must grant a secured creditor relief from the automatic stay unless, by the later of 90 days after the order for relief (a period the court may extend for cause by an order entered within those 90 days) or 30 days after the court determines that the debtor is subject to this provision, the debtor files a plan that has a reasonable possibility of being confirmed within a reasonable time or begins monthly payments to secured creditors. Those payments, which may come from the property’s rents, must equal interest at the nondefault contract rate on the value of each creditor’s interest in the property.
Speak With a Galveston County Creditor Rights and Bankruptcy Attorney
The terms negotiated at the start of a single-asset Chapter 11 case often decide how it ends. Whether you are a lender protecting your collateral or a creditor evaluating a debtor’s proposed sale, the Galveston County creditor rights and bankruptcy lawyers at Murray | Lobb Attorneys can review the order, assess your position, and act before key deadlines pass. We serve clients throughout Harris, Galveston, Fort Bend, Montgomery, and Chambers Counties. Call 281-488-0630 or contact us to schedule a consultation with a Galveston County creditor rights attorney.