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Creditors/Debtors Archives

Adequate Protection for Undersecured Creditors: The Basics

One of the reasons people file for Bankruptcy is to enjoy the protection of the automatic stay. What is the automatic stay? The automatic stay prevents creditors from taking any actions to collect from the debtor. The automatic stay is often problematic for creditors, especially secured creditors facing a debtor in Chapter 11 or Chapter 13 Bankruptcy, who are concerned the value of the collateral will decrease over time while the debtor attempts to complete their payment plan. Fortunately, the Bankruptcy Code allows undersecured parties an opportunity to lift the stay "for cause including the lack of adequate protection" after providing notice and attending a hearing. 11 U.S.C. § 362 (d)(1).

Don't Lose Your Priority By Failing to File a Continuation Statement

By creating and perfecting a security interest in a debtor's collateral, a creditor creates priority in the collateral in case of default over other interested parties such as: unsecured creditors, subsequent secured creditors, judicial lien creditors, and the powerful trustee in bankruptcy. For most collateral, simply filing a proper financing statement (such as a UCC-1 financing statement) is the easiest way to perfect a security interest.

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