What Is Cash Collateral And The Use Of Secured Property?

After the filing of the case the first motion usually filed is for a Cash Collateral Order. Generally there is property that will be used for the business that generates revenue. If the property has been used to secure a loan the creditor must be given Adequate Protection. For instance, if Accounts Receivables have been pledged payments have to be made to the creditor before the company can use the revenue. Or, if you have a delivery truck with interest payments have to made to the finance company in amount based on its monthly depreciation.

Fees And Costs

The filing fee for a Chapter 11 including administrative charges is $1,717.00.

Attorney’s fees are to be paid before the filing of the case. These initial fees must be approved by the Bankruptcy Court when the lawyer by motion becomes the attorney of record. The lawyer cannot seek additional compensation for at least 120 day after the case is filed.

After the case is filed the D.I.P may hire other professionals such as an accountant or an appraiser but only after filing a motion and allowed by an Order of Court.

The D.I.P is required to file monthly reports with the U.S. Trustee on income and operating expense. On a quarterly basis there is a fee to be paid to the U.S. Trustee. The fee is based on disbursements. The minimum fee is $325 every three months.

The U.S. Trustee

The U.S. Trustee oversees the entire Chapter 11 and will be present at all court hearings.

Shortly after the filing of the case principals of the company must attend an “initial interview” with the U.S. Trustee. At this interview the U.S. Trustee will emphasize the duties of the Chapter 11 Debtor and will evaluate the possible plan that will be filed.

Within 20 to 40 days after the filing of the case there will be a formal meeting with the trustee. The principles of the Chapter 11 Debtor will be sworn under oath. Any interested party may attend the meeting and ask questions.

The Plan

The aim of the Chapter 11 is that a plan will be approved that explains how the Debtor will repay its creditors over a period of time (rarely exceeding 5 years).

Impaired creditors vote on the plan. These creditors either need to vote to accept the plan or the Debtor In Possession needs to go through confirmation hearings on and convince the judge the plan is in the best interests of all the creditors.

Once a plan is confirmed, the business is on its way but is obligated to make payments to its creditors as laid out in the Plan. Some reports are filed demonstrating that the first of the payments have been made.

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