Common Issues Related to Reorganization Cases

All reorganization cases have the following issues in common:
Cash Collateral request:

Factors Debtor's motion should consider in requesting use of cash collateral:

• Crop yields


• a) Market price
• b) Other income
• c) Expenses


• Business revenue projections
• Source of supplies
• Marketing outlet
• Availability of insurance
• Attempt to find alternative sources of financing
• Debtor's capacity to perform
• Value of creditor's collateral

Things Court should consider:

1. Debtor spending should be limited to projections
2. Granting of replacement lien
3. Assignment of insurance policies
4. Monitoring Debtor's business operations
5. Debtor must show reasonable prospect of confirming a plan.
6. Payment of interest
7. All funds should be deposited in DIP account.

Motion for Relief from Stay § 362(d)

1. For cause, including the lack of adequate protection of an interest in property of such property; or

2. grounds:

(A) Debtor has no equity in the collateral. Creditor has burden; once established burden is on debtor to prove all other facts to show creditor is not entitled to stay.

and

(B) The collateral is not necessary for an effective reorganization. It is not enough to show that the property is necessary, or that the plan cannot function without the collateral. The debtor must also show that the property at issue is necessary for a reorganization "that is in prospect" In re United Savings Association v. Timbers of Inwood Forest Assc., 484 U.S. 365 (1988). The Debtor should be able to show that he or she is making progress towards filing a plan, and that the debtor has a reasonable chance of confirming a plan within a reasonable time. This implies that the debtors plan is confirmable. The biggest issue is feasibility.

Factors that a creditor will consider in seeking a lift of stay:

1. Debtor has not taken proper care of collateral
2. Debtor has not maintained insurance coverage
3. Debtor has failed to pay property taxes
4. Debtor is failing to pay on senior debt and therefore accruing interest, resulting in junior creditor losing collateral position.
5. The value of the collateral is depreciating.
6. Debtor does not have prospect for reorganizing

Does the trustee take a position? What about feasibility?

Avoidance of liens Current law §522(f)(3)(B). Debtor may not avoid the fixing of a lien on an interest of the debtor if the lien is a nonpossessory, nonpurchase-money security interest in implements, ... tools of trade, ... exceeds $5,475.00. If filing as a couple, can you avoid $10,950.00.

Preference § 547(e)(3) What about floating liens. Hypo: Debtor buys cattle or plants crops within 90 days of filing.

Anticipate plan Discuss how computer plan computes payments. Discuss purpose of liquidation analysis and valuation of asset exhibit. Emphasize again the importance of cash flow projections.