After-Acquired Property and Cash Collateral
allows a s.i. to attach to personal property to be acquired by D in the future
In inventory and accounts financing, secured C’s commonly take a
on all of D’s
inventory, accounts, general intangibles, and the proceeds
thereof, then owned or thereafter
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.
What B does, is it comes in and cuts off the after acquired property clause.
means post-petition you know longer have Lien on the newly acquired INV, BUT it
It allows for proceeds to come in post-petition.
In re Bumper Sales, Inc.
C moved to condition use, sale or lease of collateral and proceeds, asserting
security interest in
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.
(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.
In Ch.11 cases the cash collateral can
’t be used w/
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.
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
Postfiling Interest on Secured Claims
Claims for post-petition interest are normally disallowed under §502(b)(2).
However, 506(b) awards oversecured creditors (involuntary/voluntary) postfiling interest.
K rate for consensual security interests
Statutory rate w/ respect to judicial/statutory liens (involuntary)
- schedule of priorities for the final distribution of the estate to unsecured claims
Unsecured are divided into
(1) those entitled to
(2) those not entitled to priority (priority payments must be made in full before non)