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Secured Claim
LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.
Secured Claim
Modification of Secured Claim
Adequate Protection
Secured debt usually includes the right of the creditor to seize identifiable property if there is a default, in addition to the promise or ability of the debtor to pay. A secured claim under the Bankruptcy Code is an allowed claim, secured by a lien on property of the debtor, or subject to a setoff. A secured claim is generally secured only to the extent of value of the particular collateral. If the allowed claim of the creditor is greater than the value of the collateral, the claim may be divided into a secured claim, up to the value of collateral, and an unsecured claim for the balance. Anyone who holds a "secured claim" or "lien" in a Bankruptcy proceeding should immediately discuss an actual case with their actual legal advisor or legal department.
The secured claim is generally considered secured only to the extent of the value of the particular collateral. If the allowed claim of the creditor is greater than the value of the collateral, the claim may be divided into a secured claim, up to the value of collateral, and an unsecured claim for the balance. A portion of Section 506 of Title 11 of the United States Code defines a "secured claim" as:
"An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim."
Under Section 1222, the plan Chapter 12 plan may modify the rights of holders of secured claims, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due.
Therefore, if the value of the farm of the debtor has decreased greatly, the Chapter 12 plan may reduce the secured claim to the market value of the collateral. Another provision of Section 1222 provides for payment of allowed secured claims which otherwise meet plan qualifications, over a period exceeding the five year period permitted to the court under section 1222(c). See Section 1222 reproduced here for illustration purposes only.
Section 361 regarding adequate protection does not apply in a case under Chapter 12. Section 1205 provides that adequate protection applies to protect the secured creditor from a decrease in the value of property securing a claim or of an entity's ownership interest in property. In a case under Chapter 12, when adequate protection is required of an interest of an entity in property, such adequate protection may be provided by -
(1) cash payment or periodic cash payments;
(2) providing an additional or replacement lien;
(3) paying to such entity for the use of farmland the reasonable rent customary in the community where the property is located, based upon the rental value, net income, and earning capacity of the property; or
(4) granting such other relief, other than entitling such entity to compensation as an administrative expense, as will adequately protect the value of property securing a claim or of such entity's ownership interest in property.
See Section 1205 reproduced here for illustration purposes only.
