Allie Strauss

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Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection. In acting as the borrower’s fairy godmother, the Court noted that the 5% DRI, an industry standard for construction loans, was unreasonable because it was not negotiated in detail at origination…