Bankruptcy Law - May a Creditor Internally Allocate Collateral to Become Oversecured after the Bankruptcy Petition has been Filed?

In August 2012, the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division, rejected a secured creditor’s contention that it could internally allocate the collateral that secures the debt, becoming effectively oversecured regarding one or more of the claims, after the bankruptcy petition had been filed.  The Court ultimately followed the analysis in In re T-H New Orleans Ltd. P’ship and applied the cash on hand and adequate  protection payments, for collateral that did not depreciate in value, to reduce the amount of the secured claim, resulting in the creditor becoming oversecured anyway and entitled to attorney’s fees and interest.

Read the case note in Related Content, below.  Read the full case HERE.