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Secured Transactions Assignment 11. Tracing Collateral Value During Bankruptcy. The Big Picture. Chapters 1 and 2. Creditors’ Remedies Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered?

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Secured Transactions Assignment 11


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    secured transactions assignment 11

    Secured TransactionsAssignment 11

    Tracing Collateral Value During Bankruptcy

    the big picture
    The Big Picture

    Chapters 1 and 2. Creditors’ Remedies

    Chapter 3. Creation of Security Interests

    Assignment 8: Formalities for Attachment

    Assignment 9: What Collateral and Obligations are Covered?

    Assignment 10: Proceeds (State Law)

    Assignment 11: Proceeds (Bankruptcy)

    basic concepts

    Basic Concepts

    After acquired property clauses aren’t good in bankruptcy:

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 1

    Basic Concepts

    After acquired property clauses aren’t good in bankruptcy:

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 2

    Basic Concepts

    After acquired property clauses aren’t good in bankruptcy:

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case.

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 3

    Basic Concepts

    The secured party’s right to proceeds continues in bankruptcy:

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 4

    Basic Concepts

    The secured party’s right to proceeds continues in bankruptcy:

    §552(b)(1). . . . [If] the debtor and an entity entered into a security agreement before [commencement] andif the security interest . . .extends to property . . . acquired before [commencement] and toproceeds, products, offspring or profits. . .tensuch security interest extends to proceeds . . . except to the extent that the court . . . based on the equities of the case, orders otherwise.

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 5

    Basic Concepts

    The secured party’s right to proceeds continues in bankruptcy:

    §552(b)(1). . . . [If] the debtor and an entity entered into a security agreement before [commencement] and if the security interest . . . extends to property . . . acquired before [commencement] and to proceeds . . .thensuch security interest extends to proceeds, products, offspring or profits acquired after [commencement] . . . except to the extent that the court . . . based on the equities of the case, orders otherwise.

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 6

    Basic Concepts

    The secured party’s right to proceeds continues in bankruptcy:

    §552(b)(2). . . . if the debtor and an entity entered into a security agreement before [commencement] and if the security interest . . . extends to property of the debtor acquired before the commencement of the case and to amounts paid as rents of such property or the fees, charges, accounts, or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties, then such security interest extends to such rents and such fees, charges, accounts, or other payments . . ., except to any extent that the court, . . . based on the equities of the case, orders otherwise.

    Commencement

    of bankruptcy

    Security

    agreement

    Property

    acquisition

    basic concepts 14

    Basic Concepts

    Proceeds is broader than value tracing. Example:

    Bank has SI in the inventory of Furniture Store

    Furniture Store buys a sofa for $500 and incurs labor costs to sells it for $1000.

    Bank has a SI in the entire $1000. §9-102(a)(64)

    Proceeds is narrower than value tracing. Example:

    Bank has SI in the inventory of Carpenter (nails)

    Carpenter uses $170,000 of services and $50 worth of nails fulfilling a $200,000 contract to build floats for a parade.

    Probably none of the $200,000 account is proceeds of the nails. Inman, page 186.

    basic concepts 15

    Basic Concepts

    “Equities of the case” exception to the right to proceeds:

    basic concepts 16

    Basic Concepts

    “Equities of the case” exception to the right to proceeds:

    §552(b)(1).Except as provided in sections 363 and 548 of this title,ifthe debtor and an entity entered into a security agreement before the commencement of the case andifthe security interest created by such security agreement extends(to property acquired before the commencement of the case)and(to proceeds, products, offspring, or profits of such property), thensuch security interest extends(to such proceeds, products, offspring or profits acquired by the estate after the commencement of the case) to the extent provided by such security agreement and by applicable bankruptcy law, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise.

    basic concepts 17

    Basic Concepts

    “Equities of the case” exception to the right to proceeds:

    §552(b)(1).Except as provided in sections 363 and 548 of this title,ifthe debtor and an entity entered into a security agreement before the commencement of the case andifthe security interest created by such security agreement extends(to property acquired before the commencement of the case) and (to proceeds, products, offspring, or profits of such property), thensuch security interest extends(to such proceeds, products, offspring or profits acquired by the estate after the commencement of the case) to the extent provided by such security agreement and by applicable bankruptcy law, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise.

    Interpretation: strict value-tracing

    three equitable ways to trace value

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed

    Labor and expenses

    Collateral

    Contributions

    three equitable ways to trace value 1

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed

    Labor and expenses

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 2

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 3

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed; what remains is not proceeds

    Labor and expenses

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 4

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed; what remains is not proceeds

    Labor and expenses

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 5

    Three “equitable” ways to trace value

    Cafeteria Operators rule: The cost of collateral is reimbursed; what remains is not proceeds

    Labor and expenses

    Labor and

    expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 6

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds

    Labor and expenses

    Collateral

    Contributions

    three equitable ways to trace value 7

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds

    Labor and expenses

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 8

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds share in proportion to their contributions . . .

    Labor and expenses

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 9

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds share in proportion to their contributions . . .

    Labor and expenses

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 10

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds share in proportion to their contributions . . .

    Labor and expenses

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 11

    Three “equitable” ways to trace value

    Gunnison rule: Labor and expenses are reimbursed; what is left is proceeds.

    Collateral

    Labor and expenses

    Contributions

    three equitable ways to trace value 12

    Three “equitable” ways to trace value

    Gunnison rule: Labor and expenses are reimbursed; what is left is proceeds.

    Collateral

    Labor and expenses

    Contributions

    Proceeds

    three equitable ways to trace value 13

    Three “equitable” ways to trace value

    Gunnison rule: Labor and expenses are reimbursed; what is left is proceeds.

    Collateral

    Collateral

    Labor and expenses

    Labor and expenses

    Contributions

    Proceeds

    three equitable ways to trace value 14

    Three “equitable” ways to trace value

    Gunnison rule: Labor and expenses are reimbursed; what is left is proceeds.

    Collateral

    Labor and expenses

    Contributions

    Proceeds

    three equitable ways to trace value 15

    Three “equitable” ways to trace value

    Gunnison rule: Labor and expenses are reimbursed; what is left is proceeds.

    Collateral

    Labor and expenses

    Labor

    Labor and expenses

    Expenses

    Contributions

    Proceeds

    basic concepts 18

    Basic Concepts

    • 363(c) regulates the use of cash collateral in bankruptcy.
    • Must have creditor’s consent or order of the court to use cash collateral. Need to give adequate protection
    • E.g. Use cash to make new inventory and give a lien in the new “after acquired” inventory to the cash collateral secured party in exchange.
    problem 11 1 page 194

    Problem 11.1, page 194

    Horace

    wins

    purse

    Security

    agreement

    Problem 10.3. Horace wins the purse. Is the purse “proceeds?”

    Answer: Maybe.

    problem 11 1 page 194 1

    Problem 11.1, page 194

    Horace

    wins

    purse

    Track

    pays

    purse

    Security

    agreement

    Bankruptcy

    Problem 10.3. Horace wins the purse. Is the purse “proceeds?”

    Answer: Maybe.

    Problem 11.1. Debtor files bankruptcy and track pays. Is the secured party’s case stronger, weaker, or unchanged?

    problem 11 1 page 194 2

    Problem 11.1, page 194

    Horace

    wins

    purse

    Track

    pays

    purse

    Security

    agreement

    Bankruptcy

    Problem 10.3. Horace wins the purse. Is the purse “proceeds?”

    Answer: Maybe.

    Problem 11.1. Debtor files bankruptcy and track pays. Is the secured party’s case stronger, weaker, or unchanged?

    Answer: Unchanged. §552(a) does not apply to the purse

    basic concepts 19

    Basic Concepts

    §552(b)(1).Except as provided in sections 363 and 548 of this title,if the debtor and an entity entered into a security agreement before the commencement of the case andif the security interest created by such security agreement extends (to property acquired before the commencement of the case)and(to proceeds, products, offspring, or profits of such property), then such security interest extends(to such proceeds, products, offspring or profits acquired by the estate after the commencement of the case) to the extent provided by such security agreement and by applicable bankruptcy law, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise.

    problem 11 1 page 194 3

    Problem 11.1, page 194

    Horace

    wins

    purse

    Track

    pays

    purse

    Security

    agreement

    Bankruptcy

    Problem 10.3. Horace wins the purse. Is the purse “proceeds?”

    Answer: Probably.

    Problem 11.1. Debtor files bankruptcy and track pays. Is the secured party’s case stronger, weaker, or unchanged?

    Answer: Unchanged. §552(b) does not apply to the purse winning. Article 9 does apply.

    Article 9

    552(b)

    Purse

    payable

    Horace

    Money

    problem 11 2 page 194

    Problem 11.2, page 194

    Security

    agreement

    Description of collateral: “Equipment, inventory, and accounts.”

    problem 11 2 page 194 1

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Description of collateral: “Equipment, inventory, and accounts.”

    problem 11 2 page 194 2

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account?

    problem 11 2 page 194 3

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes.

    problem 11 2 page 194 4

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    problem 11 2 page 194 5

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case . . .

    problem 11 2 page 194 6

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case.

    problem 11 2 page 194 7

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. No.

    problem 11 2 page 194 8

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. No.

    As proceeds?

    problem 11 2 page 194 9

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. No.

    As proceeds? No, the account is not proceeds. §9-102(a)(64)

    problem 11 2 page 194 10

    Problem 11.2, page 194

    Polly files

    bankruptcy

    Polly

    works

    Customer

    pays

    Security

    agreement

    Washers as inventory?

    Account

    Description of collateral: “Equipment, inventory, and accounts.”

    Did the work create an account? Yes. Is the account collateral?

    As after acquired property?

    §552(a). Except as provided in subsection (b) . . . property acquired by the estate . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. No.

    As proceeds? No, the account is not proceeds. §9-102(a)(64)

    problem 11 3 page 194
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Same facts as Problem 10.5

    problem 11 3 page 194 1
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy.

    problem 11 3 page 194 2
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy. What is ELP’s collateral?

    problem 11 3 page 194 3
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy. What is ELP’s collateral? $6,000, maybe the new copier.

    problem 11 3 page 194 4
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy. What is ELP’s collateral? $6,000, maybe the new copier.

    Our collateral may be gone. Do we have a remedy?

    problem 11 3 page 194 5
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy. What is ELP’s collateral? $6,000, maybe the new copier.

    Our collateral may be gone. Do we have a remedy? §363(c)(2)?

    problem 11 3 page 194 6
    Problem 11.3, page 194

    Check

    to rent

    XT-100

    Copier

    #XEX30

    Insurance

    payable

    Bank

    account

    Check

    New

    copier

    Bankruptcy

    Same facts as Problem 10.5, except debtor filed bankruptcy. What is ELP’s collateral? $6,000, maybe the new copier.

    Our collateral may be gone. Do we have a remedy? §363(c)(2)? Maybe under Craddock-Terry Shoe, page 102.

    problem 11 4 page 195
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    problem 11 4 page 195 1
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    problem 11 4 page 195 2
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    a. If the court follows Gunnison, how much is cash collateral? 363(a)

    “Cash collateral” means cash . . . in which the estate and an entity other than the estate have an interest . . . .”

    problem 11 4 page 195 3
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    a. If the court follows Gunnison, how much is cash collateral? 363(a)

    The net revenues, which are $11,000 – if the food and drink money is “proceeds” at all!

    problem 11 4 page 195 4
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    Hotel files

    bankruptcy

    Hotel sells food/drink

    Customer

    pays

    Security

    agreement

    Accounts

    §552(a): Property acquired . . . after the commencement of the case is not subject to any lien resulting from any security agreement entered into . . . before the commencement of the case.

    problem 11 4 page 195 5
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    Hotel files

    bankruptcy

    Hotel sells food/drink

    Customer

    pays

    Security

    agreement

    Food/drink inventory

    Accounts

    §552(b): [I]f the debtor . . . entered into a security agreement before the commencement of the case [that extended] to property . . . acquired before the commencement of the case and to proceeds . . . of such property, then such security interest extends to such proceeds . . . acquired after the commencement of the case . . . .

    problem 11 4 page 195 6
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    b. If the court follows Delbridge, how much is cash collateral?

    CC = D x P

    D+E+L

    problem 11 4 page 195 7
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    b. If the court follows Delbridge, how much is cash collateral?

    CC = D x P

    D+E+L

    Depreciation is zero, so cash collateral is zero.

    problem 11 4 page 195 8
    Problem 11.4, page 195

    Description of collateral: “real property, equipment, inventory . . .

    and all income, rents, royalties, revenues, issues, profits, fees,

    accounts, and other proceeds (including without limitation, room

    sales and revenues from sales of services, food and drink),

    currently owned or after-acquired.”

    b. If the court follows Delbridge, how much is cash collateral?

    CC = D x P

    D+E+L

    Depreciation is zero, so cash collateral is zero.

    Is that formula right?

    three equitable ways to trace value 16

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds

    Labor and expenses

    Collateral

    Contributions

    three equitable ways to trace value 17

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds share in proportion to their contributions . . .

    Labor and expenses

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    three equitable ways to trace value 18

    Three “equitable” ways to trace value

    Delbridge rule: The contributors to proceeds share in proportion to their contributions . . .

    How much did Globus contribute to the existence of the Hotel operations proceeds?

    Labor and expenses

    Labor and expenses

    Collateral

    Collateral

    Contributions

    Proceeds

    problem 11 4 page 195 9
    Problem 11.4, page 195

    §552(b)(2). [I]f the security interestcreated by such security agreementextends to. . . amounts paid as . . . the fees, charges, accounts, or other payments for the use or occupancy of roomsand other public facilities in hotels . . . then such SI extends to . . . such payments acquired [after filing].

    c. If the court reads §552(b)(2) literally, how much is cash collateral?

    problem 11 4 page 195 10
    Problem 11.4, page 195

    §552(b)(2). [I]f the security interest created by such security agreement extends to . . . amounts paid as . . . the fees, charges, accounts, or other payments for the use or occupancy of rooms and other public facilities in hotels . . . then such SI extends to . . . such payments acquired [after filing].

    c. If the court reads §552(b)(2) literally, how much is cash collateral?

    $510K. The statute does not authorize deduction of expenses. The food and drink revenue still may not be “proceeds.”

    basic concepts 20

    Basic Concepts

    §552(b)(1). . . .[I]fthe debtor and an entity entered into a security agreement before the commencement of the case andif the security interest created by such security agreement extends(to property acquired before the commencement of the case) and (to amounts paid as rents of such property or the fees charges, accounts, or other payment for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties), then such security interest extends(to such rents and such fees, charges, accounts, or other payments acquired by the estate after the commencement of the case)to the extent provided in such security agreement, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise.

    problem 11 5 page 195
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”

    $9M

    $7M

    problem 11 5 page 195 1
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing

    $9M

    $7M

    problem 11 5 page 195 2
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month

    $9M

    $7M

    problem 11 5 page 195 3
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing?

    $9M

    $7M

    problem 11 5 page 195 4
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M

    $9M

    $7M

    problem 11 5 page 195 5
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate
    • protection?

    $9M

    $7M

    problem 11 5 page 195 6
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.

    $9M

    $7M

    problem 11 5 page 195 7
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate
    • protection? No. Timbers.
    • c. Is the rent received collateral?

    $9M

    $7M

    problem 11 5 page 195 8
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.
    • Is the rent received collateral? Yes. §552(b).

    $9M

    $7M

    problem 11 5 page 195 9
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate
    • protection? No. Timbers.
    • c. Is the rent received collateral? Yes. §552(b).
    • d. If debtor uses the rent, is Globus entitled to adequate protection?

    $9M

    $7M

    problem 11 5 page 195 10
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.
    • Is the rent received collateral? Yes. §552(b).
    • If debtor uses the rent, is Globus entitled to adequate protection? Yes.§363(e).

    $9M

    $7M

    problem 11 5 page 195 11
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.
    • Is the rent received collateral? Yes. §552(b).
    • If debtor uses the rent, is Globus entitled to adequate protection? Yes. §363(e). No, quote at bottom of page 185.

    $9M

    $7M

    problem 11 5 page 195 12
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.
    • Is the rent received collateral? Yes. §552(b).
    • If debtor uses the rent, is Globus entitled to adequate protection? Yes. §363(e). No, quote at bottom of page 185.
    • If yes, how will debtor provide it?

    $9M

    $7M

    problem 11 5 page 195 13
    Problem 11.5, page 195
    • Description of collateral: building and “rents and proceeds”
    • Building is debtor’s only asset, value is
    • not changing
    • Rents are $100K per month
    • What is Globus’ secured claim at filing? $7M
    • Was Globus entitled to interest or adequate protection? No. Timbers.
    • Is the rent received collateral? Yes. §552(b).
    • If debtor uses the rent, is Globus entitled to adequate protection? Yes. §363(e). No, quote at bottom of page 185.
    • If yes, how will debtor provide it? Debtor can’t unless court applies “equities” exception. End of reorganization.

    $9M

    $7M