Ii rule ch7 debtor may not strip off allowed junior

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Chapter 18 / Exercise 02
Business Law Today, Standard: Text & Summarized Cases
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ii. Rule Ch.7 debtor may not “strip off” allowed junior lien when senior lien exceeds fair market value of real property. 1. Can’t strip down or strip off (stripping down value of lien to the value of collateral)
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Business Law Today, Standard: Text & Summarized Cases
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Chapter 18 / Exercise 02
Business Law Today, Standard: Text & Summarized Cases
Jentz/Miller
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12 4. After-Acquired Property and Cash Collateral a. UCC 9-204(a) allows a s.i. to attach to personal property to be acquired by D in the future b. In inventory and accounts financing, secured C’s commonly take a floating lien on all of D’s inventory, accounts, general intangibles, and the proceeds thereof, then owned or thereafter acquired i. Lien is perfected in each of the collaterals (INV, A/R, Proceeds), so this is a constantly changing collateral. Your Lien floats to each changing form. ii. What B does, is it comes in and cuts off the after acquired property clause. Which means post-petition you know longer have Lien on the newly acquired INV, BUT it has exceptions. It allows for proceeds to come in post-petition. c. In re Bumper Sales, Inc. i. Facts - C moved to condition use, sale or lease of collateral and proceeds, asserting security interest in D’s INV and seeking adequate protection thereof. Creditors' committee objected to creditor's motion challenging proper perfection of creditor's security interest. B.Ct. granted creditor a lien on debtor's pre- and postpetition collateral, and appeal was taken. D.Ct., affirmed, and appeal was taken. ii. Rule - (1) financing statements were not “seriously misleading,” despite their use of secured party's trade name; (2) bankruptcy statute invalidating after-acquired property clauses did not prevent creditor from acquiring security interest in property acquired by debtor after bankruptcy filing, to extent such property was traceable to proceeds from sale of prepetition inventory in which creditor had security interest ; and (3) creditor did not lose security interest in such after-acquired property by failing to condition its consent to debtor's use of cash collateral on grant of s.i. iii. In Ch.11 cases the cash collateral can ’t be used w/ out the C’s consent. In this case, the C could have asked for a replacement lien which would have affected cutting off the after acquired cash collateral post petition. iv. What could the secured creditor have done he could have required that certain protections be given to it (replacement lien) so that D can use the cash so it would never be put in the position 5. Postfiling Interest on Secured Claims a. Claims for post-petition interest are normally disallowed under §502(b)(2). b. However, 506(b) awards oversecured creditors (involuntary/voluntary) postfiling interest. i. K rate for consensual security interests ii. Statutory rate w/ respect to judicial/statutory liens (involuntary) E. P RIORITY C LAIMS 1. Introduction a. §726(a) - schedule of priorities for the final distribution of the estate to unsecured claims b. Unsecured are divided into 2 Groups : i. (1) those entitled to priority under §507 and ii. (2) those not entitled to priority (priority payments must be made in full before non) c.

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