1. 1 Secured Transactions Assignment 7 Treatment of Secured Creditors in Bankruptcy

2. 2 The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Assignment 6: Bankruptcy and the Automatic Stay Assignment 7: Treatment of Secured Creditors in Bankruptcy

3. 3 What secured creditors get in bankruptcy $6K $10K

4. 4 What secured creditors get in bankruptcy 1. Bifurcation of claim §506(a) $6K $10K

5. 5 What secured creditors get in bankruptcy 1. Bifurcation of claim §506(a) $6K $10K $4K un- secured claim $6K secured claim

6. 6 What secured creditors get in bankruptcy 1. Bifurcation of claim §506(a) 2. Secured portion: payment in full $6K $10K $4K un- secured claim $6K secured claim

7. 7 What secured creditors get in bankruptcy 1. Bifurcation of claim §506(a) 2. Secured portion: payment in full 3. Unsecured portion: prorata payment with other unsecured claims $6K $10K $4K un- secured claim $6K secured claim

8. 8 What secured creditors get in Chapter 7 1. Bifurcation of claim §506(a) 2. Secured portion: payment in full 3. Unsecured portion: prorata payment with other unsecured claims Example: Debtor files Chapter 7; trustee sells the asset $6K $10K $4K un- secured claim $6K secured claim

9. 9 What secured creditors get in Chapter 7 1. Bifurcation of claim §506(a) 2. Secured portion: payment in full 3. Unsecured portion: prorata payment with other unsecured claims Example: Debtor files Chapter 7; trustee sells the asset $6K $10K $4K un- secured claim $6K secured claim Secured creditor gets $6,000 from sale; $4,000 claim shares prorata in other assets, if any.

10. 10 What secured creditors get in Chapter 13 §1325(a)(5). With respect to each allowed secured claim... $6K $10K $4K un- secured claim $6K secured claim

11. 11 What secured creditors get in Chapter 13 §1325(a)(5). With respect to each allowed secured claim... (A) The holder of such claim has accepted the plan; $6K $10K $4K un- secured claim $6K secured claim

12. 12 What secured creditors get in Chapter 13 §1325(a)(5). With respect to each allowed secured claim... (A) The holder of such claim has accepted the plan; (B)(i)(I) the plan provides that the holder of such claim retain the lien securing such claim... and (ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim [$6K]... orowed amount of such claim; or (C) the debtor surrenders the property securing such claim to such holder $6K $10K $4K un- secured claim $6K secured claim

13. 13 What secured creditors get in Chapter 13 §1325(a)(5). With respect to each allowed secured claim... (A) The holder of such claim has accepted the plan; (B)(i)(I) the plan provides that the holder of such claim retain the lien securing such claim... and (ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim [$6K]... or (C) the debtor surrenders the property securing such claim to such holder $6K $10K $4K un- secured claim $6K secured claim

14. 14 Interest on claims Interest on claims is important: Example: 30-year loan at 6%

15. 15 Interest on claims Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest

16. 16 Interest on claims Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

17. 17 An oversecured creditor is presumptively entitled to its contractual default rate of interest, provided that the rate is enforceable under applicable nonbankruptcy law. General Elec. Capital Corp. v. Future Media Productions, Inc. (In re Future Media Productions, Inc.), 530 F.3d 1178 (9th Cir. 2008). Such presumption can be rebutted on equitable considerations.

18. 18 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Undersecured Over secured Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

19. 19 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) Undersecured Over secured Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

20. 20 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) Undersecured Over secured Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

21. 21 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) Undersecured Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

22. 22 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) UndersecuredNo, Timbers Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

23. 23 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) UndersecuredNo, Timbers Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest For $167 million, 30 years, at 6%, payment is $1 million per month

24. 24 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) UndersecuredNo, Timbers Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest For $167 million, 30 years, at 6%, payment is $1 million per month Timbers: In one-year bankruptcy, secured loses $10 million.

25. 25 Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) Yes §1129(b)(2) UndersecuredNo, Timbers Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

26. 26 §1325(a)(5): “[T]he value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim.” Interest on claims Is a creditor entitled to interest on its claim? PrepetitionPendencyPost-confirmation Unsecured Yes, §502(b) No, §502(b) Yes §1129(b)(2) UndersecuredNo, Timbers Over securedYes, §506(b) Interest on claims is important: Example: 30-year loan at 6% 1. Over half of all payments will be interest 2. In first year, 83% of payments will be interest

27. 27 Sale “subject to lien” v. “free and clear” $80K $100K What seller has

28. 28 Sale “subject to lien” v. “free and clear” $80K $100K What seller has Price: $20K 1.Lien goes with the property 2. Buyer is not liable for any deficiency unless buyer “assumes and agrees to pay”

29. 29 Sale “subject to lien” v. “free and clear” $80K $100K What seller has $80K $100K What buyer gets Price: $20K 1.Lien goes with the property 2. Buyer is not liable for any deficiency unless buyer “assumes and agrees to pay”

30. 30 Sale “subject to lien” v. “free and clear” $80K $100K What seller has

31. 31 Sale “subject to lien” v. “free and clear” $80K $100K What seller has Price: $100K $80K lien is transferred to the proceeds

32. 32 Sale “subject to lien” v. “free and clear” $80K $100K What seller has $100K What buyer gets Price: $100K $80K lien is transferred to the proceeds

33. 33 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal

34. 34 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal Interest Feb 15 – Mar 15?

35. 35 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15.

36. 36 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. Interest Mar 15 – Sep 15?

37. 37 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. Interest Mar 15 – Sep 15. Rate?

38. 38 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18%

39. 39 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18% Interest Sep 15 – Dec 15, §502(b)(2)?

40. 40 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18% 0Interest Sep 15 – Dec 15, §502(b)(2)

41. 41 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18% 0Interest Sep 15 – Dec 15, §502(b)(2) Attorneys fees for work in August?

42. 42 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18% 0Interest Sep 15 – Dec 15, §502(b)(2) 0Attorneys fees for work in August

43. 43 Problem 7.1, page 128 Mar 15 Feb 15 Dec 15 Sep 15 Work done Bill sent Bank- ruptcy Now What items are included in CompuSoft’s claim? $30,000Principal 0Interest Feb 15 – Mar 15. $2,700Interest Mar 15 – Sep 15. Rate? 18% 0Interest Sep 15 – Dec 15, §502(b)(2) 0Attorneys fees for work in August $32,700Amount of the unsecured claim

44. 44 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Problem 7.2, page 128

45. 45 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim Problem 7.2, page 128

46. 46 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128

47. 47 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500

48. 48 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500

49. 49 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500 =.05 =

50. 50 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500 =.05 = CompuSoft distribution CompuSoft claim

51. 51 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500 =.05 = $1,635 $32,700 CompuSoft distribution CompuSoft claim =

52. 52 CompuSoft claim, $32,700 Total claims, $1,191,500 Total amount available to pay claims, $59,575 Prorata distribution: Each creditor will get the same percentage of its claim What percentage will that be? Problem 7.2, page 128 All distributions $59,575 All claims $1,191,500 =.05 = $1,635 $32,700 CompuSoft distribution CompuSoft claim =

53. 53 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal 6 months interest unpaid Bank- ruptcy Now $340K Lien $400K

54. 54 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal 6 months interest? 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K

55. 55 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K

56. 56 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest 3 months interest? 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K

57. 57 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest $10,8123 months interest 6 months Interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K

58. 58 Problem 7.3.a, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest $10,8123 months interest $371,212Claim (secured) 6 months Interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K

59. 59 Problem 7.3.b, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest $10,8123 months interest $371,212Claim (secured) 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K If market rate 12% and plan confirmed today, how much?

60. 60 Problem 7.3.b, page 129 3 months What is in the claim? $340,000Principal $20,4006 months interest $10,8123 months interest $371,212Claim (secured) 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K If market rate 12% and plan confirmed today, how much? $371,212 plus interest

61. 61 Confir- mation Problem 7.3.c, page 129 3 months12 months If plan not confirmed for year? $340,000Principal $20,4006 months interest $10,8123 months interest 12 months interest? 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K $43.2K

62. 62 Problem 7.3.c, page 129 3 months12 months If plan not confirmed for year? $340,000Principal $20,4006 months interest $10,8123 months interest $28,78812 months interest 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K $28.8K $14.4K Confir- mation

63. 63 Problem 7.3.c, page 129 3 months12 months If plan not confirmed for year? $340,000Principal $20,4006 months interest $10,8123 months interest $28,78812 months interest $400,000Claim (secured) 6 months Interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K $28.8K $14.4K Confir- mation

64. 64 Problem 7.3.c, page 129 3 months12 months If plan not confirmed for year? $340,000Principal $20,4006 months interest $10,8123 months interest $28,78812 months interest $400,000Claim (secured) Claim (unsecured)? 6 months Interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K $28.8K $14.4K Confir- mation

65. 65 Problem 7.3.c, page 129 3 months12 months If plan not confirmed for year? $340,000Principal $20,4006 months interest $10,8123 months interest $28,78812 months interest $400,000Claim (secured) 0Claim (unsecured) 6 months interest unpaid Bank- ruptcy Now $340K Lien $20.4K $400K $10.8K $28.8K Confir- mation

66. 66 Problem 7.4, page 129 3 months12 months a. What is in the claim? Secured claim ? 6 months Interest unpaid Bank- ruptcy Now $340K Lien $20.4K If the value is only $325K? $10.8K $43.2K Confir- mation

67. 67 Problem 7.4, page 129 3 months12 months a. What is in the claim? $325,000Principal (secured) $325,000Secured claim 6 months interest unpaid Bank- ruptcy Now $325K Lien $20.4K If the value is only $325K? $10.8K $43.2K Confir- mation $15.0K

68. 68 Problem 7.4, page 129 3 months12 months a. What is in the claim? $325,000Principal (secured) $325,000Secured claim Unsecured claim? 6 months interest unpaid Bank- ruptcy Now If the value is only $325K? $325K Lien $20.4K $10.8K $43.2K Confir- mation $15.0K

69. 69 $20.4K Problem 7.4, page 129 3 months12 months a. What is in the claim? $325,000Principal (secured) $15,000Principal (unsecured) $20,4006 mo. interest (unsec) 03 mo. interest $325,000Secured claim $35,400Unsecured claim 6 months interest unpaid Bank- ruptcy Now $325K Lien If the value is only $325K? $10.8K $43.2K Confir- mation $15.0K $325K Lien

70. 70 Problem 7.5, page 129 3 months12 months a. What is in the claim? Unsecured claim? 6 months interest unpaid Bank- ruptcy Now $340K $20.4K $10.8K $43.2K Confir- mation No security agreement exists

71. 71 Problem 7.5, page 129 3 months12 months a. What is in the claim? $340,000Principal $20,4006 mo. interest 03 mo. interest $360,400Unsecured claim 6 months interest unpaid Bank- ruptcy Now $340K $20.4K $10.8K $43.2K Confir- mation No security agreement exists

72. 72 Problem 7.5, page 129 3 months12 months b. How much do we get? $340,000Principal $20,4006 mo. interest 03 mo. interest $360,400Unsecured claim At 10¢ on the dollar 6 months interest unpaid Bank- ruptcy Now $340K $20.4K $10.8K $43.2K Confir- mation No security agreement exists

73. 73 Problem 7.5, page 129 3 months12 months b. How much do we get? $340,000Principal $20,4006 mo. interest 03 mo. interest $360,400Unsecured claim $36,040At 10¢ on the dollar 6 months interest unpaid Bank- ruptcy Now $340K $20.4K $10.8K $43.2K Confir- mation No security agreement exists

74. 74 Problem 7.6, page 129 Sale for $1 million Now $1million Six months a. How much to the estate? §541 $1,000,000Sale proceeds

75. 75 Problem 7.6, page 129 Now Six months “Such estate is composed of... all legal and equitable interests of the debtor in property... $1million a. How much to the estate? §541 $1,000,000Sale proceeds Sale for $1 million

76. 76 Problem 7.6, page 129 Six months Now $850,000 Mort $1million a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim Sale for $1 million “Such estate is composed of... all legal and equitable interests of the debtor in property...

77. 77 Problem 7.6, page 129 Six months Interest accrued Now $850,000 Mort $42,500 $1million a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest Sale for $1 million “Such estate is composed of... all legal and equitable interests of the debtor in property...

78. 78 Problem 7.6, page 129 Six months Interest accrued Now $850,000 Mort $60,000 $42,500 $10K $1million a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest $60,000Broker $10,000Costs, property taxes Sale for $1 million “Such estate is composed of... all legal and equitable interests of the debtor in property...

79. 79 Problem 7.6, page 129 Six months Interest accrued Now $850,000 Mort $60,000 $42,500 $10K $1million a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest $60,000Broker $10,000Costs, property taxes $37,500Net to the estate Sale for $1 million

80. 80 Problem 7.6, page 129 Six months Interest accrued Now $850,000 Mort $60,000 $42,500 $10K Can trustee recover the costs of sale from the secured creditor’s share? $1million a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest $60,000Broker $10,000Costs, property taxes $37,500Net to the estate Sale for $1 million

81. 81 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest $60,000Broker $10,000Costs, property taxes $37,500Net to the estate

82. 82 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 a. How much to the estate? §541 $1,000,000Sale proceeds $850,000Secured claim $42,500Six months of interest $60,000Broker $10,000Costs, property taxes $37,500Net to the estate $850,000 Mort $60,000 $42,500 $10K

83. 83 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel

84. 84 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay

85. 85 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay Forecloses in state court

86. 86 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay Forecloses in state court Buys property at sale?

87. 87 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay Forecloses in state court Buys property at sale? Hires broker

88. 88 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay Forecloses in state court Buys property at sale? Hires broker Sells property

89. 89 §506(c). The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.... Does 1 st Capital benefit from this sale? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K Trustee sells (house)Trustee does not sell 1 st Capital paid in full1 st Capital: Hires counsel Lifts stay Forecloses in state court Buys property at sale? Hires broker Sells property Paid in full?

90. 90 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against us c.Can First Capital prevent us from selling? §554(b) Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

91. 91 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against us c.Can First Capital prevent us from selling? §554(b) Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

92. 92 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against us c.Can First Capital prevent us from selling? §554(b) Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

93. 93 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from selling? §554(b) Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

94. 94 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from trying to sell? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K §554(b). On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.

95. 95 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from trying to sell? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K §362(d)(1). On request of a party in interest... the court shall grant relief from the stay... for cause, including the lack of adequate protection of an interest in property of such party in interest.

96. 96 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from trying to sell? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K §362(d)(1). On request of a party in interest... the court shall grant relief from the stay... for cause, including the lack of adequate protection of an interest in property of such party in interest. 1st Capital must show risk of loss from collateral value decline

97. 97 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from trying to sell? d. We are advising the trustee. Is selling the house the right thing to do? Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

98. 98 a.If we sell in exactly six months, how much money to the estate? $37,500 to $107,500 b.What if it takes longer to sell? Interest is accruing against the estate at $7,083.30 per month c.Can First Capital prevent us from trying to sell? d. We are advising the trustee. Is selling the house the right thing to do? Harms the secured to help the unsecureds Problem 7.6, page 129 $850,000 Mort $60,000 $42,500 $10K

99. 99 Problem 7.7.a, page 130 If Friendly’s lien is on the Piper aircraft $214,000Piper aircraft $150,000Less Friendly Credit $64,000 Net to the estate, aircraft $26,000Coin collection $2,200Cash $92,200Total available for distribution

100. 100 Problem 7.7.a, page 130 If Friendly’s lien is on the Piper aircraft $214,000Piper aircraft $150,000Less Friendly Credit $64,000 Net to the estate, aircraft $26,000Coin collection $2,200Cash $92,200Total available for distribution $300,000General unsecured claims

101. 101 Problem 7.7.a, page 130 If Friendly’s lien is on the Piper aircraft $214,000Piper aircraft $150,000Less Friendly Credit $64,000 Net to the estate, aircraft $26,000Coin collection $2,200Cash $92,200Total available for distribution $300,000General unsecured claims.3073Cents per dollar

102. 102 Problem 7.7.b, page 130 If Friendly’s lien is on the coin collection $214,000Piper aircraft $26,000Coin collection $26,000Less Friendly Credit secured 00Net to the estate $2,200Cash $216,200Total available for distribution

103. 103 Problem 7.7.b, page 130 If Friendly’s lien is on the coin collection $214,000Piper aircraft $26,000Coin collection $26,000Less Friendly Credit secured 00Net to the estate $2,200Cash $216,200Total available for distribution $300,000General unsecured claims $124,000Plus Friendly unsecured $424,000Total unsecured claims

104. 104 Problem 7.7.b, page 130 If Friendly’s lien is on the coin collection $214,000Piper aircraft $26,000Coin collection $26,000Less Friendly Credit secured 00Net to the estate $2,200Cash $216,200Total available for distribution $300,000General unsecured claims $124,000Plus Friendly unsecured $424,000Total unsecured claims.5099Cents per dollar