Law360, New York ( December 11, 2013, 3:46 PM EST) -- In the matter of B.R. Brookfield Commons No. 1 LLC, the Seventh Circuit recently confirmed that Bankruptcy Code Section 1111(b)(a)(A) treats an otherwise nonrecourse loan as a recourse loan in bankruptcy, regardless of whether there is any equity in the property securing that loan, and the lender is entitled to a claim in bankruptcy.[1] Accordingly, Bankruptcy Code Section 1111(b)(1)(A) breaks from the traditional confines of bankruptcy law by telling courts to ignore state law and nonrecourse agreements as a protection to nonrecourse creditors who would otherwise be left in the cold where a judicial valuation of the property serving as their collateral is less than the value of their claim.[2] The effect of § 1111(b)(1)(A) is that an otherwise nonrecourse debt outside of bankruptcy is treated as recourse for purposes of a bankruptcy claim, and a nonrecourse creditor may elect to retain its unsecured deficiency claim against the estate....