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Adequate Protection in Bankruptcy
by Adam Mack, JD
Adequate protection is a concept in bankruptcy law and is codified by 11 U.S. Code § 361. It refers to protection granted to creditors by the court for the purpose of protecting the creditor's interests in secured. For example, a bank may want protection from a car depreciating while the debtor is trying to get his or her plan confirmed. Under the bankruptcy code, adequate protection can come in the form of cash payments, liens, the imposition of insurance or any other relief that the court deems appropriate to safeguard the creditor's interests in the secured collateral while bankruptcy process runs its course.
A typical example of adequate protection might occur when a person files a chapter 13 bankruptcy. In our example, lets say the debtor owns a vehicle with a lien on it. The debtor then files a chapter 13 plan which proposes to pay the loan through the plan. Lets also assume that the plan is set to run for 48 months and there are 55 months left on the car payment. How much money would the bank holding the note have to be paid to protect their interest? That depends on what factors are at play that will diminish the secured creditor's interest. The passage of time, the mileage being driven, and the general condition of the vehicle are all factors that play into depreciation. As you can probably gather by reading this brief article, establishing when a creditor is adequately protected is different in every case. It varies from one set of facts to another, and if the parties cannot agree on what adequate protection entails, then the matter can only be settled by the bankruptcy judge.
When seeking relief under Title 11, most people seek an experienced bankruptcy lawyer to represent them. However, sometimes individuals decide to tackle a bankruptcy on their own. These trudge through a field of figurative landmines totally unrepresented by legal counsel. Bankruptcy is extremely technical and complicated, and self-representation (in this author's opinion) is a very risky proposition. Adequate protection is just one example of many which illustrate the deep complexity of bankruptcy law. You can be sure that the bank will hire a lawyer to maximize their protection in the bankruptcy process. There are several local Topeka bankruptcy lawyers who are well qualified and able to represent you in a bankruptcy. You owe it to yourself to seek the legal counsel necessary to facilitate your fresh start.