§ 47.1     Adequate Protection of Lienholders before Confirmation
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 47.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The debtor’s use of estate property prior to confirmation may not be free. The adequate protection requirement in 11 U.S.C. § 361 applies in Chapter 13 cases, and the cost of using or recovering1 estate property between filing and confirmation may include providing adequate protection to secured creditors.2 In cases filed after October 22, 1994, the adequate protection requirement in § 363(e) also applies to personal property subject to an unexpired lease.3

[2]

In districts that reach confirmation soon after the § 341 meeting,4 adequate protection issues in Chapter 13 cases are few and far between. Districts that delay confirmation until after the claims bar date invite lienholders to file stay relief motions and to demand adequate protection.

[3]

Typically, adequate protection means the debtor is required to make preconfirmation payments to the trustee or to the lienholder to protect the claim holder from depreciation of its collateral pending confirmation of a plan.5 The debtor will almost always be required to prove that collateral is insured against accident, theft or destruction.6 This is especially true of cars: in some jurisdictions, by local rule or practice, the Chapter 13 debtor must prove the existence of insurance on any car subject to a lien as a condition of use pending confirmation and as a requirement of confirmation. With respect to real property, it has been said that preconfirmation adequate protection includes hazard insurance and a plan proposal for the payment of real estate taxes that accrue between filing and confirmation.7 In Chapter 13 cases, adequate protection sometimes includes that the debtor proposes a plan for payment of the lienholder consistent with its rights at confirmation.8 Adequate protection is a flexible concept, and the reported decisions demonstrate creativity in fashioning adequate protection requirements in Chapter 13 cases.9

[4]

Although common in some jurisdictions,10 adequate protection payments by a Chapter 13 debtor directly to a creditor prior to confirmation are a bad idea. The better practice is to make preconfirmation adequate protection payments to the Chapter 13 trustee. The Chapter 13 trustee is bonded and will reliably account for adequate protection payments. The Chapter 13 trustee will either hold the preconfirmation adequate protection payments pending final determination of the terms of the plan or the Chapter 13 trustee may be directed by court order or local rule to disburse adequate protection payments to lienholders prior to confirmation.11 In either case, the trustee maintains records of the adequate protection payments received from the debtor and disbursed to lienholders.

[5]

Typically, the Chapter 13 plan will have to make provision for the full payment of allowed secured claims during the life of the plan.12 If the debtor is making adequate protection payments directly to a secured claim holder between the filing of the case and confirmation of a plan, the amount of the allowed secured claim and the calculation of the payments necessary through the confirmed plan become a moving target.13 Section 361 of the Bankruptcy Code provides that when adequate protection is required, it can be supplied by “requiring the trustee to make a cash payment or periodic cash payment.”14 Direct payments of adequate protection by a debtor to a lienholder before confirmation are not specifically authorized by the Bankruptcy Code in a Chapter 13 case.15 Also, because § 1326(a) requires the debtor to begin making the payments called for by the plan within 30 days of filing the plan,16 requiring the debtor to also make adequate protection payments directly to a secured claim holder may be redundant of payments that are required to be made to the Chapter 13 trustee. Preconfirmation adequate protection payments to the trustee rather than directly to a secured claim holder avoids all of these problems.

[6]

Making preconfirmation adequate protection payments to the trustee rather than directly to the creditor poses two risks for the lienholder. First, the secured claim holder loses the use value of its adequate protection payments until actually received from the trustee. However, because the debtor must ultimately pay the “present value” of the allowed secured claim at confirmation,17 some of the lost use value of the principal portion of the payments that would have been otherwise required during the administrative period are recovered as interest after confirmation. Second, if no plan is confirmed under § 1326(a)(2), funds held by the trustee are returned to the debtor, subject only to claims that qualify as administrative expenses under § 503(b).18 Lienholders often cannot prove entitlement to an administrative expense under § 503(b) when a Chapter 13 case fails before confirmation.19

[7]

Given these risks, it is understandable that lienholders persist in the demand that adequate protection be paid directly by the debtor prior to confirmation. It’s just not a good idea for the debtor, for the trustee or for others who may have administrative claims if the case fails before confirmation. Adequate protection payments to the Chapter 13 trustee accounted for in the proposed plan set a better pattern for the future of the case.

[8]

The amount of preconfirmation adequate protection that must be paid by a Chapter 13 debtor is problematic in Chapter 13 cases, as in cases under all chapters of the Code. Section 361 of the Code, as interpreted by the U.S. Supreme Court in United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd.,20 at least requires a Chapter 13 debtor to compensate a creditor for depreciation in the value of its collateral between the filing of the case and the effective date of the plan. In jurisdictions where Chapter 13 cases move quickly from filing to confirmation,21 it may be difficult or impossible to calculate exactly what value the creditor lost in its collateral during the approximately 50 days from filing to confirmation.

[9]

If the creditor’s collateral is a car, the lost value may be the depreciation between the demand for adequate protection and confirmation.22 Estimation of this amount is possible with respect to cars—monthly used car guides provide some information about the average loss in value of a particular car from one month to the next.23 Some reported decisions calculate the amount of depreciation that must be paid each month to adequately protect a car lender as the change in value of the car between the petition and confirmation divided by the number of months during that period.24 One court cited “guidelines promulgated by the chapter 13 standing trustee” that required monthly adequate protection payments for an undersecured car lender at the rate of 1.25 percent of the value of the collateral.25 In the absence of other evidence, another court concluded that “average monthly depreciation” for a car is 1 percent of the car’s value, payable each month between the petition and confirmation as adequate protection.26 This calculation becomes more difficult or impossible with respect to other personal property: how much does a water bed depreciate in 45 days?

[10]

Accounting for adequate protection payments at confirmation is controversial.27 Some reported decisions say that preconfirmation adequate protection payments reduce the allowed amount of the lienholder’s secured claim that must be paid at confirmation under § 1325(a)(5); other courts seem to apply preconfirmation adequate protection payments to the debt of the lienholder without regard to whether all of that debt is secured. For example, in In re Davis,28 GMAC’s debt at the petition was $28,147.95, secured by a 1995 Cadillac. The Cadillac was valued at the petition at $25,000. Eleven months later at confirmation, the car was valued at $22,250. During the preconfirmation period, the debtors authorized the Chapter 13 trustee to make adequate protection distributions to GMAC totaling $3,667. Mathematically, GMAC’s collateral depreciated by only $2,750. The bankruptcy court held that GMAC was entitled to retain all of the adequate protection payments and that the $3,667 was “applied to the overall outstanding debt.”29

[11]

In contrast, in In re Cook,30 the bankruptcy court acknowledged that a car lender was entitled to preconfirmation adequate protection payments based on the declining value of a car between the filing of a Chapter 13 case and confirmation. The court indicated that the car should be valued at the date the lienholder moved for relief from the stay or moved for adequate protection, and preconfirmation adequate protection payments should be based on the average decline in value between that date and confirmation. At confirmation, the value previously determined would be “reduced by the aggregate amount of adequate protection payments made to the secured creditor, and the remaining amount will be the value of the secured creditor’s claim for confirmation purposes.”31

[12]

There is a fundamental difference of accounting between Davis and Cook. Cook holds that adequate protection payments reduce the allowable amount of a creditor’s secured claim at confirmation dollar for dollar. Davis revalues collateral at confirmation without regard to adequate protection payments and allows the secured claim holder to credit adequate protection payments to its overall debt without regard to whether that debt is fully secured. In other words, Davis permits adequate protection payments to be applied by an undersecured claim holder to its unsecured claim. This is an odd result. Unsecured claim holders are not entitled to adequate protection because they have no interest in estate property for purposes of § 361 of the Code.

[13]

For adequate protection purposes, a lienholder is entitled to adequate protection payments that at least equal the decline in the value of collateral between the demand for protection and confirmation. It has been held that for adequate protection purposes the value entitled to protection is what the lienholder would realize if the collateral were surrendered or foreclosed upon.32 The theory here is that liquidation or surrender value is the lienholder’s interest but for the debtor’s use of the collateral prior to confirmation. In contrast, as explained by the Supreme Court in Associates Commercial Corp. v. Rash,33 at confirmation the lienholder is entitled to the “replacement value” of its collateral.34 Replacement value will rarely produce the same number as liquidation or surrender value. When depreciation is calculated working from one standard and present value at confirmation is based on a different standard, it is no wonder it is not simple to account for adequate protection payments made between the two valuations.35

[14]

Avoiding this result, some courts approximate the second valuation by reducing the value of the collateral at the petition by the amount of depreciation used to calculate adequate protection payments between the petition and confirmation.36 The lienholder in Davis received an overpayment of adequate protection in the amount of $917—the difference between the $3,667 it received in adequate protection payments and the $2,750 that its collateral declined between the petition and confirmation. This $917 should not be applied toward GMAC’s unsecured claim but should reduce, dollar for dollar, the amount of GMAC’s allowed secured claim at confirmation. To do otherwise allows the secured claim holder a preconfirmation reduction of its unsecured claim to which it is not entitled. Cook gets almost to this result but fails to recognize that the lienholder is entitled to a second valuation at confirmation that is independent of the adequate protection payments it may have received during the administrative period. In a perfect world, adequate protection payments would always exactly equal the decline in value of the collateral prior to confirmation. But when imperfect valuation results in an overpayment of adequate protection, the overpayment should at least reduce the allowable secured claim at confirmation.37

[15]

For a chilling illustration of accounting for adequate protection payments in a Chapter 13 case, consider In re Stembridge.38 The Bankruptcy Court for the Northern District of Texas reaches confirmation after the claims bar date. Pursuant to local order, the debtor is required within 15 days of the petition to seek authorization to make adequate protection payments to a car lender at the rate of “1.25% of collateral value” per month. Value for the purpose of calculating monthly adequate protection is “the N.A.D.A. Official Used Car Guide Trade Value,” which approximates “what a lender might recover from a vehicle through foreclosure.”39

[16]

At confirmation, the car lender is entitled to replacement value determined “starting from the retail value provided in the N.A.D.A. Official Used Car Guide . . . . [T]he N.A.D.A. value may be averaged with the contemporaneous Kelley Blue Book Private Party Value to produce a replacement value.”40 Then, the court explained, at confirmation, the lienholder is entitled to the greater of the replacement value at the time of confirmation or the adequate protection value at the earlier date; when the adequate protection value is greater, the adequate protection value is reduced by adequate protection payments received during the case.

[17]

In Stembridge, the trade value for the truck was $12,825 on the date adequate protection payments were required. At confirmation, the replacement value was $12,607.50. During the year between the filing and confirmation, the debtor made adequate protection payments totaling $1,311.75. To account for the adequate protection payments, the court held that at confirmation the debtor must pay the present value of $12,825 minus $1,311.75, or $11,513.25. The court noted that the trade value of the truck fell from $12,825 at the time adequate protection was required to $11,075 at confirmation—a loss in value of $1,750. Since the debtor paid only $1,311.75 as adequate protection, it looked like the lienholder had been shortchanged $439. But for purposes of confirmation, this shortfall in adequate protection was not a problem:

Although the Trade Value of the Truck has dropped more than the adequate protection paid to Chase, the amount the court looks to in determining the value of Chase’s collateral under the Plan is the Replacement Value of the Truck, $12,607.50. Since this value is greater than the total of Chase’s claim, $11,513.25 (which includes the deficiency in adequate protection payments), Chase would be fully secured following confirmation.41
[18]

Perhaps there is good logic somewhere in Stembridge, but it has to be said that the use of two different valuation standards, two different valuation dates and a formula for adequate protection payments intended to mimic depreciation between the two dates renders the calculation in Stembridge impenetrable. Applying the Stembridge logic, why would an informed Chapter 13 debtor make any adequate protection payments unless and until the (higher) replacement value falls below the (lower) liquidation value? Put another way, if replacement value at confirmation cures a shortfall in adequate protection payments, what happened to the theory that adequate protection payments are necessary to protect lienholders from depreciation between the petition and confirmation? The use of different valuation standards generates secret equity that emerges at confirmation to protect the lienholder from adequate protection that was either underestimated or just not paid by the debtor. There has to be a simpler way to account for adequate protection payments at confirmation in a district that delays confirmation in Chapter 13 cases until after the claims bar date.

[19]

The Bankruptcy Reform Act of 1994 added a new adequate protection responsibility for Chapter 13 debtors. Section 219 of the 1994 Act extended the adequate protection requirement in § 363(e) to “property that is subject to any unexpired lease of personal property (to the exclusion of such property being subject to an order to grant relief from the stay under § 362).”42 Congressman Brooks explained that § 363(e) was amended “to clarify that the lessor’s interest is subject to ‘adequate protection’ during the period of time during which the debtor can determine whether to assume or reject a lease of personal property.”43

[20]

It is quite common for Chapter 13 debtors to have rental contracts for personal property such as cars, televisions, stereos, washing machines and the like. Leases of personal property have generated much litigation in Chapter 13 cases because the terms of such contracts are often very unfavorable to debtors, and many Chapter 13 debtors have litigated whether “rent-to-rent” contracts are disguised security agreements.44 In Chapter 13 cases filed after October 22, 1994, if a lessor of personal property requests adequate protection (and is not granted relief from the stay), the debtor is required to adequately protect the lessor’s interest in the leased property. The 1994 amendment to § 363(e) seems likely to require Chapter 13 debtors (and courts) to imagine appropriate adequate protection for the lessor of an aging washing machine or bedroom suite that has value only to the debtor.

[21]

One bankruptcy court found that a lessor was entitled to relief from the stay because a Chapter 13 debtor could not provide adequate protection. In In re Williams,45 the debtor leased a truck, and the contract prohibited the debtor from using the truck for any work other than the lessor’s. The debtor proposed to assume the lease through the plan, but the debtor had breached the lease before the petition by using the truck for jobs not provided by the lessor. The bankruptcy court framed the adequate protection issue this way: “Whether or not [Lessor’s] interest in the truck is adequately protected depends on whether or not Debtor can assume the lease. . . . Debtor must cure two types of default: (1) a monetary default . . . (2) a nonmonetary default arising from his use of the truck in the course of his employment.”46

[22]

The bankruptcy court found that the debtor could cure the monetary default by paying money to the lessor. But with respect to the prohibited use of the truck, cure of that default was impossible, and thus the debtor could not provide adequate protection:

This Court is . . . persuaded by . . . Worthington v. General Motors Corp. (In re Claremont Acquisition Corp., Inc.), 113 F.3d 1029 (9th Cir. 1997) . . . and finds that Debtor must cure his nonmonetary default in order to assume the contract. In this case, the cure is impossible. Debtor’s use of the leased truck in the course of his employment with U.S. Intermodal is a historical fact that cannot be altered. Thus, Debtor is unable to assume the lease and, consequently, is unable to adequately protect [the Lessor’s] interest in the truck.47
[23]

Several courts have addressed whether and how a Chapter 13 debtor must adequately protect a lien on cash. For example, in Hooper v. United States (In re Hooper),48 the IRS levied on the debtor’s prepetition wages and held some cash at the Chapter 13 petition. The court found that the debtor retained a sufficient interest in the wages that the IRS could be required to turn over the money; however, the debtor was first required to provide adequate protection for the use of the cash. The debtor argued that the proposed Chapter 13 plan, which provided for full payment of the IRS, was adequate protection for the IRS’s possessory interest in the cash. The court disagreed:

We are not dealing with a piece of tangible personal property here, such as an automobile, but rather with cash. If it was just an automobile, the debtor’s plan may very well provide adequate protection, but when the property at issue is cash, it is very difficult for this court to find that a promise to pay the cash in the future is adequate protection for a creditor with the cash in hand at present.49
[24]

To adequately protect possession of cash, a Chapter 13 debtor might offer a substitute lien on other property, coupled with payment of the creditor’s claim through the plan. In one reported decision, a business Chapter 13 debtor’s motion to use cash collateral was denied because the debtor could not provide any of the traditional forms of adequate protection for the use of cash collateral.50

[25]

The regular monthly payment a prepetition contract requires the debtor to make to a secured claim holder rarely bears any relationship to the adequate protection rights of that creditor. Monthly contract payments include interest, profit, insurance charges, etc.—amounts that have nothing to do with the decline in value of collateral occasioned by the debtor’s use before confirmation. Even the payments that a Chapter 13 debtor will make to a secured claim holder after confirmation through the Chapter 13 plan only poorly mirror depreciation because other considerations apply at confirmation, including the length of the plan and interest to compensate a secured claim holder for the “present value” of its allowed secured claim.51 However, because § 1326(a) requires the Chapter 13 debtor to commence making the payments called for by the plan within 30 days of the filing of the plan,52 most debtors can satisfy the adequate protection requirements of § 361 by immediately beginning to make payments to the trustee in the amount called for by the proposed plan.53 Unless the debtor undervalued the collateral or understated the amount that a secured claim holder will be entitled to at confirmation, commencement of the payments required by the proposed plan should be sufficient to adequately protect lienholders pending confirmation.

[26]

As in all bankruptcy cases, lienholders are not automatically entitled to adequate protection in a Chapter 13 case.54 Except with respect to cash collateral,55 the debtor’s use of estate property is not subject to the adequate protection rights of a lienholder unless and until the creditor requests adequate protection. The creditor in possession of estate property that refuses delivery to the debtor based on a demand for adequate protection risks violating the automatic stay.56

[27]

As explained by the Supreme Court in United States v. Whiting Pools, Inc.,57 adequate protection is a lienholder’s right under the Bankruptcy Code that substitutes for the possession to which the creditor might be entitled by contract or state law; however, a lienholder cannot simply hold estate property hostage to extract adequate protection. Rather, the lienholder must “seek protection of its interest according to the Congressionally established bankruptcy procedures, rather than by withholding the seized property from the debtor’s efforts to reorganize.”58 The safest route to adequate protection for a lienholder in possession of estate property is to deliver the property to the debtor or to the trustee and simultaneously file a motion for adequate protection that includes a request for expedited relief from the stay.59

[28]

In the typical Chapter 13 case, adequate protection is demanded informally by a lienholder and negotiated with debtor’s counsel. If court involvement becomes necessary, adequate protection can be requested by a creditor by motion for adequate protection or by motion for relief from the stay for cause based on the lack of adequate protection.60 After the 1994 amendments to § 363(e), a lessor of personal property is entitled to adequate protection “to the exclusion of” relief from the stay.61 In other words, if a lessor of personal property is granted relief from the stay, the lessor is not also entitled to adequate protection of its interest in personal property leased to the debtor.62 The creditor that fails to request adequate protection prior to confirmation is not entitled to adequate protection and cannot later complain that its interest in estate property was impaired by the debtor’s use during the Chapter 13 case.63

[29]

Ideally, the Chapter 13 case moves fast enough toward confirmation that creditors do not feel compelled to seek relief from the stay or to demand adequate protection payments prior to confirmation. However, in jurisdictions that delay confirmation until after the expiration of the period for filing proofs of claim,64 and in any Chapter 13 case in which the debtor delays reaching confirmation, creditors with interests in estate property may demand adequate protection and be entitled to periodic payments, substitute liens or some other form of protection.

[30]

Discussed more fully elsewhere,65 there are reported decisions holding or suggesting that the failure of a Chapter 13 debtor to make payments to a lienholder can subject the debtor to administrative expense or superpriority claims based on a “failure of adequate protection.”66 Better reasoned opinions recognize that absent a preconfirmation order requiring adequate protection payments, a secured claim holder is not entitled to an administrative expense or any other priority when the debtor fails to make payments before or after confirmation of a plan.67 Even the U.S. Court of Appeals for the Fourth Circuit—which in 1989 authored the leading opinion for the view that a Chapter 13 debtor’s use of collateral without making payments would entitle the lienholder to an administrative expense68—has retreated and now acknowledges that default under a confirmed plan does not entitle a secured claim holder to administrative priority or superpriority when the creditor did not demand adequate protection before confirmation.69 There is no substitute for creditor action in this context: only a preconfirmation motion for relief from the stay or for adequate protection positions the creditor to argue for priority if the Chapter 13 case fails.70

[31]

The debtor’s best defense to an adequate protection request is a confirmed plan. Adequate protection decisions almost always come out of districts that delay confirmation until after the claims bar date.71 A systemic solution to adequate protection problems in Chapter 13 cases is to shift confirmation closer in time to the § 341 meeting. Few Chapter 13 cases can tolerate the expense and delay of adequate protection litigation. If the debtor commences making the payments to the trustee called for by the plan consistent with 11 U.S.C. § 1326(a),72 at confirmation the adequate protection problem will solve itself as creditors with liens will then be entitled to distributions and funds will already be on hand to make those payments. Though it has been held that an unconfirmed Chapter 13 plan is not itself adequate protection,73 cash payments to the Chapter 13 trustee in advance of confirmation are a convincing offer of adequate protection.


 

1  See § 52.1 [ Turnover of Property ] § 50.1  Turnover of Property.

 

2  See Giaimo v. United States (In re Giaimo), 194 B.R. 210, 214 (E.D. Mo. 1996) (Chapter 13 debtor is entitled to turnover of $14,198.18 in bank account at prepetition levy by IRS. “[T]he Bankruptcy Court will have the opportunity to address any adequate protection argument that may be properly raised before it once the funds are made a part of the bankruptcy estate.”); In re Marquez, 270 B.R. 761, 768 (Bankr. D. Ariz. 2001) (“Prior to Plan confirmation 11 U.S.C. § 361 entitles creditors, whose collateral is depreciating and who request it, to adequate protection payments.”); In re Raspberry, 264 B.R. 495, 501 (Bankr. N.D. Ill. 2001) (Interpreting new Illinois Wage Deduction Act, judgment creditor has continuing lien on the debtor’s wages, is a secured claim holder and is entitled to adequate protection. “The post-petition, pre-confirmation wages are subject to the adequate protection requirements of § 361 for the benefit of the Judgment Creditor.”); In re Farmer, 257 B.R. 556 (Bankr. D. Mont. 2000) (Undersecured car lender is entitled to adequate protection payments prior to confirmation equivalent to the monthly depreciation.); In re Robinson, 225 B.R. 228 (Bankr. N.D. Okla. 1998) (If car lender moves for adequate protection, car lender is entitled to adequate protection for expenses, fees, and depreciation that occurred after the petition. Lender’s failure to ask for adequate protection relieves debtor of obligation to adequately protect car lender’s interest.); Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159 (Bankr. N.D. Ill. 1998) (Debtor supplied adequate protection to car lender by maintaining full coverage insurance and confirming a full-payment plan.); Northrup v. Ben Thompson Enters. (In re Northrup), 220 B.R. 855 (Bankr. E.D. Pa. 1998) (Car repairman with a possessory lien must turn over car subject to adequate protection requirements that debtor register the car in Pennsylvania, obtain a driver’s license, advance $200, and file and serve a plan.); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710 (Bankr. M.D. Ga. 1998) (Debtor will be entitled to turn over of car repossessed before the petition if debtor adequately protects car lender’s interest by proof of insurance and payments required by the proposed plan.); In re Coker, 216 B.R. 843 (Bankr. N.D. Ala. 1997) (Debtor can use insurance proceeds from postconfirmation destruction of car to purchase a replacement vehicle, but the insurance proceeds are cash collateral subject to the car lender’s security interest, and the debtor must provide adequate protection in the form of continued monthly payments consistent with the confirmed plan and a replacement lien in the substitute car.); In re Davis, 215 B.R. 824 (Bankr. N.D. Tex. 1997) (Adequate protection of security interest in a car between filing and confirmation requires valuing the car at the petition and valuing a second time at confirmation, and payments to car lender between the two valuations must at least equal the difference in value.); In re Kirkpatrick, 214 B.R. 314 (Bankr. S.D. Ohio 1997) (Tax refund is cash collateral that the debtor can use only if the debtor provides adequate protection to the IRS. IRS is not required to surrender tax refund until the debtor has paid an equivalent amount to the IRS.); In re Cook, 205 B.R. 437 (Bankr. N.D. Fla. 1997) (Upon request, Chapter 13 debtor is required to make adequate protection payments to a car lender directly or through the Chapter 13 trustee before confirmation; payments reduce the car lender’s claim for confirmation purposes.); In re Walters, 203 B.R. 122 (Bankr. S.D. Ill. 1996) (A Chapter 13 debtor must adequately protect GMAC during the period between the filing of the petition and confirmation. Different concepts apply at confirmation.); Carey v. GMAC (In re Carey), 202 B.R. 796 (Bankr. M.D. Ga. 1996) (At destruction of car after petition but before confirmation, insurance proceeds are property of the estate, and debtor can use the proceeds by providing adequate protection in the form of a replacement lien.); In re Hatcher, 202 B.R. 626 (Bankr. E.D. Okla. 1996) (With respect to a home mortgage, adequate protection includes maintenance of insurance on the property.), aff’d in part, dismissed in part for lack of jurisdiction, 208 B.R. 959 (B.A.P. 10th Cir. 1997); Lyons v. Federal Sav. Bank (In re Lyons), 193 B.R. 637 (Bankr. D. Mass. 1996) (Assignment of rents clause was not absolute under Massachusetts law but was additional security for mortgage debt. Rents were cash collateral. Debtor could use postpetition rents to fund Chapter 13 plan if debtor could provide adequate protection.); In re Young, 193 B.R. 620, 621 (Bankr. D.D.C. 1996) (Prepetition repossession of the debtor’s car did not terminate the debtor’s title, thus the car became property of the Chapter 13 estate. “The mere seizure of the vehicle did not suffice to destroy the debtor’s title as long as the debtor had a right to redeem.” Car lender did not violate the automatic stay by refusing to turn over the car pending the debtor’s providing adequate protection. Lender was entitled to maintain the status quo postpetition.); In re Cason, 190 B.R. 917 (Bankr. N.D. Ala. 1995) (Adequate protection requirement for a car lender is triggered by motion for adequate protection or for stay relief.); In re Estes, 185 B.R. 745, 749 (Bankr. W.D. Ky. 1995) (Before a creditor can be required to turn over a car repossessed before the petition, the debtor must bring an adversary proceeding and must prove adequate protection of the creditor’s interest in the car. “Before a debtor may receive the turn-over of property it must put forth a plan providing for adequate protection for any decline in value resulting from the use of the vehicle. . . . [T]he Bankruptcy Court must establish the value of the secured creditor’s interest, identify the risks to secured creditor’s value resulting from debtor’s use of the property and determine whether the debtor’s proposal protects value as nearly as possible against risk to that value consistent with the concept of indubitable equivalence.”); Cardillo v. Andover Bank (In re Cardillo), 169 B.R. 8 (Bankr. D.N.H. 1994) (Section 363(e) requires the debtor to provide adequate protection before a creditor is required to turn over cash seized from the debtor before the petition.); Hooper v. United States (In re Hooper), 152 B.R. 309 (Bankr. D. Colo. 1993) (IRS is not required to turn over money unless the Chapter 13 debtor provides adequate protection for the use of the cash.); Brickel v. Merchants Nat’l Bank, 11 B.R. 353 (Bankr. D. Me. 1981) (The Chapter 13 debtor’s power to use property subject to a lien is subject to the creditor’s right to receive adequate protection.). Accord GMAC v. Johnson (In re Johnson), 145 B.R. 108 (Bankr. S.D. Ga. 1992) (Between filing and confirmation, Chapter 13 debtor is required to provide adequate protection to secured claim holders by making preconfirmation payments to the Chapter 13 trustee.), rev’d on other grounds, 165 B.R. 524 (S.D. Ga. 1994); In re Johnson, 136 B.R. 306 (Bankr. M.D. Ga. 1991) (Although IRS has right of setoff in debtor’s tax refund, if debtor can provide adequate protection, court can refuse setoff and require the IRS to pay the refund to the debtor.); In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989) (“Adequate protection” is a preconfirmation concept. Providing adequate protection prior to confirmation is not the same as satisfying the property rights of a secured claim holder at confirmation under § 1325. The interests that must be protected from loss while the debtor attempts to confirm a Chapter 13 plan are defined in United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988); those interests may be significantly different from the present value of an allowed secured claim protected at confirmation by § 1325(a)(5).); In re Kessler, 86 B.R. 134 (Bankr. C.D. Ill. 1988) (Creditor/seller of real property to the debtor is entitled to adequate protection between the filing of the case and confirmation; adequate protection is not intended to protect a creditor after confirmation. Given that there is no evidence that the real estate is depreciating in value, seller is not entitled to adequate protection under Timbers, 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988)); GMAC v. Miller, 13 B.R. 110 (Bankr. S.D. Ind. 1981); In re Gunder, 8 B.R. 390 (Bankr. S.D. Ohio 1980); ABD Fed. Credit Union v. Williams, 6 B.R. 789 (Bankr. E.D. Mich. 1980); GMAC v. Lum, 1 B.R. 186 (Bankr. E.D. Tenn. 1979).

 

3  11 U.S.C. § 363(e), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 219, 108 Stat. 4106 (1994).

 

4  See below in this section, and see §§ 81.1 [ Lack of Adequate Protection ] § 64.1  Lack of Adequate Protection, 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders and 216.1 [ Timing of Hearing on Confirmation ] § 115.1  Timing of Hearing on Confirmation before BAPCPA.

 

5  See In re Stembridge, 287 B.R. 658, 661 (Bankr. N.D. Tex. 2002) (Pursuant to Local General Order, within 15 days of a Chapter 13 petition, the debtor must seek “Authorization for Pre-Confirmation Disbursement” to pay adequate protection for pickup truck. “Under guidelines promulgated by the chapter 13 standing trustee, monthly adequate protection payments for an undersecured creditor are calculated at 1.25% of collateral value.”); In re Marquez, 270 B.R. 761 (Bankr. D. Ariz. 2001) (Absent other evidence, adequate protection for an undersecured car lender is 1% of the value per month payable each month between the petition and the effective date of the plan.); In re Farmer, 257 B.R. 556 (Bankr. D. Mont. 2000) (Adequate protection of an undersecured car lender prior to confirmation is monthly payment to the secured creditor of the monthly depreciation in the value of the car.); In re Rogers, 239 B.R. 883 (Bankr. E.D. Tex. 1999) (Adequate protection for car lender in a delayed confirmation district includes that the debtor stays current in payments to the trustee and that the plan be modified to provide that at least one-half of the accumulated payments be paid to lienholders at confirmation or in the event of conversion or dismissal.); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710 (Bankr. M.D. Ga. 1998) (Adequate protection of a car lender includes that the debtor make the payments required by the proposed plan and that the trustee make monthly distributions to the car lender in accordance with the proposed plan.); In re Coker, 216 B.R. 843 (Bankr. N.D. Ala. 1997) (Adequate protection for use of insurance proceeds from destruction of car includes continued monthly payments consistent with the plan.); In re Davis, 215 B.R. 824, 825 (Bankr. N.D. Tex. 1997) (Adequate protection of security interest in a car between filing and confirmation includes that “[t]he debtors authorized the Chapter 13 trustee to make pre-confirmation distributions to GMAC.”); In re Cook, 205 B.R. 437 (Bankr. N.D. Fla. 1997) (Upon request, Chapter 13 debtor is required to make adequate protection payments to a car lender directly or through the Chapter 13 trustee before confirmation.); In re Cason, 190 B.R. 917 (Bankr. N.D. Ala. 1995) (Adequate protection is typically supplied to a car lender by periodic payments to the Chapter 13 trustee sufficient to cover monthly depreciation in value of car.); In re Estes, 185 B.R. 745, 749 (Bankr. W.D. Ky. 1995) (“Before a debtor may receive the turn-over of property it must put forth a plan providing for adequate protection for any decline in value resulting from the use of the vehicle. . . . [T]he Bankruptcy Court must establish the value of the secured creditor’s interest, identify the risks to secured creditor’s value resulting from debtor’s use of the property and determine whether the debtor’s proposal protects value as nearly as possible against risk to that value consistent with the concept of indubitable equivalence.”); GMAC v. Johnson (In re Johnson), 145 B.R. 108, 114 (Bankr. S.D. Ga. 1992) (Between filing and confirmation, debtor provides adequate protection to each secured claim holder “by making preconfirmation payments to the Chapter 13 trustee . . . . Upon confirmation . . . these accumulated funds are distributed pursuant to the plan . . . . Through plan payments by the Chapter 13 debtor the holder of an allowed secured claim receives adequate protection of its property interests in the collateral during the pendency of the Chapter 13 case.”), rev’d, 165 B.R. 524 (S.D. Ga. 1994); In re Holly, 109 B.R. 524 (Bankr. S.D. Ga. 1989) (Debtor can provide adequate protection to each secured claim holder before confirmation by making payments to the Chapter 13 trustee.).

 

6  See McGlockling v. Chrysler Fin. Co. (In re McGlockling), 296 B.R. 884, 888 (Bankr. S.D. Ga. 2003) (Providing physical damage insurance is part of the adequate protection necessary to compel Chrysler Credit to allow the debtor to take his car to Germany where the debtor has been assigned by the Army. “Since Debtor’s vehicle will still be insured, Chrysler will not bear the risk of physical damage when the vehicle is relocated to Germany.”); In re Rogers, 239 B.R. 883 (Bankr. E.D. Tex. 1999) (Adequate protection for car lender in a delayed confirmation district includes maintaining full-coverage insurance.); Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159, 162 (Bankr. N.D. Ill. 1998) (One aspect of adequate protection supplied by debtor was maintaining full-coverage car insurance.); Northrup v. Ben Thompson Enters. (In re Northrup), 220 B.R. 855 (Bankr. E.D. Pa. 1998) (Adequate protection of repairman with a lien on debtor’s car includes that the car is adequately insured.); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710 (Bankr. M.D. Ga. 1998) (Turn over of car repossessed before the petition is conditioned on adequate protection that includes proof of insurance consistent with the original contract.); In re Hatcher, 202 B.R. 626 (Bankr. E.D. Okla. 1996) (Adequate protection of a home mortgage includes maintaining insurance on the property.), aff’d in part, dismissed in part for lack of jurisdiction, 208 B.R. 959 (B.A.P. 10th Cir. 1997).

 

7  See In re Pinto, 191 B.R. 610, 612 (Bankr. D.N.J. 1996) (“A secured creditor lacks adequate protection if there is a threat that the value of the property may decline. . . . A threat of decline exists when there is a failure to maintain property insurance. . . . Moreover, the failure to provide for real property taxes may also be a basis for a finding of lack of adequate protection. . . . [T]he debtor’s proposed plan must include a provision for the payment of real estate taxes and appropriate insurance coverage.”).

 

8  See, e.g., McGlockling v. Chrysler Fin. Co. (In re McGlockling), 296 B.R. 884, 888 (Bankr. S.D. Ga. 2003) (Debtor’s confirmed plan and stable financial condition are part of the adequate protection necessary to compel Chrysler Credit to allow the debtor to take his car to Germany where the debtor has been assigned by the Army. “The stability of Debtor’s employment provides Chrysler with assurances that the claim will be satisfied. Debtor has a long service history with the military . . . . Debtor remains on track to complete his plan and is paying Chrysler quicker and at a higher rate of interest than under the original agreement. Debtor has satisfied his burden of proving adequate protection.”); Spears v. Ford Motor Credit Co. (In re Spears), 223 B.R. 159 (Bankr. N.D. Ill. 1998) (Debtor supplied adequate protection in part by confirming a full-payment plan.); Northrup v. Ben Thompson Enters. (In re Northrup), 220 B.R. 855, 863 (Bankr. E.D. Pa. 1998) (One condition for adequate protection of a repairman’s possessory lien is that the debtor file and serve a plan that liquidates the secured claim in full.). Compare In re Hinckley, 40 B.R. 679 (Bankr. D. Utah 1984) (Unconfirmed plan is not itself sufficient to provide adequate protection to an automobile secured creditor.).

 

9  See, e.g., In re Raspberry, 264 B.R. 495, 500–01 (Bankr. N.D. Ill. 2001) (Adequate protection of a creditor with a continuing lien on the debtor’s postpetition wages is provided as follows: “as long as the Debtor makes plan payments and remains employed at the current job and rate of compensation.”); Northrup v. Ben Thompson Enters. (In re Northrup), 220 B.R. 855, 863 (Bankr. E.D. Pa. 1998) (Repairperson with a possessory “common law lien” is required to turn over car subject to adequate protection: “We therefore will require that the Debtor properly register the Auto in Pennsylvania, obtain a Pennsylvania driver’s license, and provide evidence that he has done so and has the Auto adequately insured as conditions for its turnover. We will also require that the Debtor advance at least $200 to BTE and file and serve a plan which will liquidate BTE’s valid secured claim as further indicia of adequate protection. . . . BTE shall retain its lien in the Auto until its entire secured claim is liquidated.”).

 

10  See, e.g., In re Stembridge, 287 B.R. 658 (Bankr. N.D. Tex. 2002) (Pursuant to Local General Order, within 15 days of a Chapter 13 petition, the debtor must seek “Authorization for Pre-Confirmation Disbursement” to pay adequate protection for pickup truck.).

 

11  But see In re Cason, 190 B.R. 917, 931–34 (Bankr. N.D. Ala. 1995) (“Section 1326 requires the trustee to retain all payments made under the plan until such time as the plan is confirmed or the plan is denied confirmation. . . . Adequate protection payments, as payments inferred from the plan, fall under this same restriction. This is the reason why the trustee cannot distribute adequate protection payments prior to confirmation. . . . These payments would start to accrue upon motion and be paid post confirmation at the same time as the payment of administrative expenses and trustee fees as provided in § 1326.”).

 

12  See § 101.1 [ General Rules ] § 74.1  General Rules before BAPCPA.

 

13  See below in this section and § 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders.

 

14  11 U.S.C. § 361(1).

 

15  The debtor can be authorized to make payments to creditors after confirmation. See 11 U.S.C. § 1326(c), discussed in §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 64.4 [ Compensation on Direct Payments by Debtor ] § 54.6  Compensation on Direct Payments by Debtor, 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee and 157.1 [ Direct Payments by Debtor ] § 89.1  Direct Payments by Debtor.

 

16  See § 43.1 [ First Test of Debtor’s Good Intentions ] § 44.1  First Test of Debtor’s Good Intentions.

 

17  See 11 U.S.C. § 1325(a)(5), discussed in § 78.1  Full Payment of Allowed Secured Claim.

 

18  See §§ 43.5 [ Return of Payments to Debtor ] § 44.5  Return of Payments to Debtor, 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994 and 338.1 [ In General ] § 153.1  In General.

 

19  See § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA.

 

20  484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988).

 

21  See § 216.1 [ Timing of Hearing on Confirmation ] § 115.1  Timing of Hearing on Confirmation before BAPCPA.

 

22  See, e.g., In re Marquez, 270 B.R. 761, 768–69 (Bankr. D. Ariz. 2001) (Absent other evidence, adequate protection for an undersecured car lender is 1% of the value per month. “As an undersecured creditor, the amount of ABC’s adequate protection payments is limited to the depreciation of the value of its collateral.”); In re Farmer, 257 B.R. 556, 562 (Bankr. D. Mont. 2000) (Undersecured car lender is entitled to adequate protection payments prior to confirmation equivalent to the monthly depreciation. “‘[T]he amount by which the collateral depreciates is the amount of adequate protection to which the secured creditor is entitled.’ . . . This adequate protection payment . . . shall be paid by the Debtor to FCB . . . on the first day of each month through the confirmation date of Debtor’s plan.”); In re Davis, 215 B.R. 824 (Bankr. N.D. Tex. 1997) (Adequate protection of security interest in a car between filing and confirmation requires valuing the car at the petition and valuing a second time for confirmation purposes as of effective date of the plan. At the petition, GMAC held a claim secured by a car worth $25,000. At confirmation the car was worth $22,250. The debtors authorized the Chapter 13 trustee to make preconfirmation distributions to GMAC totaling $3,667. GMAC was adequately protected by these payments and was authorized to retain the payments as adequate protection between the petition date and the effective date of the plan.); In re Cook, 205 B.R. 437, 439 (Bankr. N.D. Fla. 1997) (Upon request, Chapter 13 debtor is required to make adequate protection payments to a car lender before confirmation. “[S]ection 363(e) authorizes a court to require the trustee to adequately protect creditors whose collateral is declining in value due to its use, sale, or lease.”); In re Cason, 190 B.R. 917, 929–31 (Bankr. N.D. Ala. 1995) (Adequate protection is typically supplied to a car lender by periodic payments to the Chapter 13 trustee sufficient to cover monthly depreciation in value of car. Valuation for adequate protection purposes would occur first at the time of the motion for adequate protection or for relief from the stay. This valuation might be different than the amount determined for confirmation purposes. “[T]he proper time for valuation of collateral for adequate protection purposes is the date the motion for adequate protection is sought. . . . When the debtor files her petition, she must make a choice of whether to surrender the collateral or retain and use the collateral, and therefore, upon request, supply the creditor with adequate protection. The Bankruptcy Code imposes a cost on this election. . . . [T]he plan in which the debtor retains the collateral takes into account the possibility of adequate protection payments. . . . The secured claim holder, upon request, receives adequate protection of its property interest, with an order fixing the amount of adequate protection for the decline in value and upon the debtor continuing to pay the trustee, pursuant to § 1326(a)(1), on a plan that contains the safeguards in § 1325 and that has a reasonable prospect of being confirmed.”); In re Estes, 185 B.R. 745, 749 (Bankr. W.D. Ky. 1995) (“Before a debtor may receive the turn-over of property it must put forth a plan providing for adequate protection for any decline in value resulting from the use of the vehicle. . . . [T]he Bankruptcy Court must establish the value of the secured creditor’s interest, identify the risks to secured creditor’s value resulting from debtor’s use of the property and determine whether the debtor’s proposal protects value as nearly as possible against risk to that value consistent with the concept of indubitable equivalence.”).

 

23  See, e.g., In re Cook, 205 B.R. 437, 440–41 (Bankr. N.D. Fla. 1997) (“In determining the amount of adequate protection a creditor is entitled to receive on its secured claim, absent more reliable evidence, the average rate of decline in the Blue Book value of the particular automobile over a three (3) month period immediately preceding the date of the request for adequate protection should be used.”).

 

24  See, e.g., In re Farmer, 257 B.R. 556, 562 (Bankr. D. Mont. 2000) (Undersecured car lender is entitled to adequate protection payments prior to confirmation equivalent to the monthly depreciation. At the petition, debtor’s truck was worth $14,175. During the 28 months since purchase, the truck had depreciated by $6,025, or $215 each month. “‘Thus, the amount by which the collateral depreciates is the amount of adequate protection to which the secured creditor is entitled.’ . . . This adequate protection payment of $215.00 shall be paid by the Debtor to FCB . . . on the first day of each month through the confirmation date of Debtor’s plan.”).

 

25  In re Stembridge, 287 B.R. 658, 661 (Bankr. N.D. Tex. 2002).

 

26  In re Marquez, 270 B.R. 761, 768 (Bankr. D. Ariz. 2001) (Absent other evidence, adequate protection for an undersecured car lender is 1% of the value per month. To calculate the amount of adequate protection, car is valued at the petition and adequate protection payments are 1% of that value per month. “In this district, payments of 1% of a vehicle’s value are routinely paid by Chapter 13 Debtors to the Chapter 13 Trustee to compensate automobile creditors for the depreciation of their collateral.”).

 

27  See also § 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders.

 

28  215 B.R. 824 (Bankr. N.D. Tex. 1997).

 

29  215 B.R. at 826. Accord In re Cason, 190 B.R. 917, 927 (Bankr. N.D. Ala. 1995) (“Adequate protection payments are payments on the claim. However, they should not be credited to the secured portion of the claim because the secured claim is determined based on a valuation of collateral at the hearing on confirmation. A decline in value which supports adequate protection payments will impact the valuation at confirmation, but it will not directly, dollar for dollar, reduce the allowed secured claim based on a filing valuation.”).

 

30  205 B.R. 437 (Bankr. N.D. Fla. 1997).

 

31  205 B.R. at 441. Accord In re Marquez, 270 B.R. 761, 768–69 (Bankr. D. Ariz. 2001) (Car is valued for confirmation purposes at the petition, and adequate protection payments of 1% of that value per month are deducted to determine the allowed amount of the secured claim at confirmation. “Prior to Plan confirmation 11 U.S.C. § 361 entitles creditors, whose collateral is depreciating and who request it, to adequate protection payments . . . . Once the Plan is confirmed, the undersecured creditor is no longer entitled to adequate protection payments. . . . [T]o assure that ABC is not overcompensated by receiving payments based on the replacement value of the Dodge, as of the petition date, the funds earmarked as ABC’s adequate protection payments should be applied to its secured claim. . . . ABC’s secured claim will be reduced by the amount of the adequate protection payments, which, in theory, should represent the amount of the Dodge’s depreciation between the petition and the effective date. . . . As an undersecured creditor, the amount of ABC’s adequate protection payments is limited to the depreciation of the value of its collateral.”); In re Farmer, 257 B.R. 556, 562 (Bankr. D. Mont. 2000) (Undersecured car lender is entitled to adequate protection payments prior to confirmation equivalent to the monthly depreciation; these payments are credited against secured claim, and the depreciated value of the car at the effective date of the plan must be paid to satisfy § 1325. At the petition, debtor’s truck was worth $14,175. During the 28 months since purchase, the truck had depreciated by $6,025, or $215 each month. “‘Thus, the amount by which the collateral depreciates is the amount of adequate protection to which the secured creditor is entitled.’ . . . This adequate protection payment of $215.00 shall be paid by the Debtor to FCB . . . on the first day of each month through the confirmation date of Debtor’s plan. Such payments shall be applied to the secured portion of FCB’s principal claim and not to any interest accruing on the secured portion of the claim as FCB is undersecured and not to any portion of the unsecured portion of FCB’s claim.”).

 

32  In re Stembridge, 287 B.R. 658, 663 (Bankr. N.D. Tex. 2002) (Value for adequate protection purposes is not the replacement value to which the lienholder will be entitled at confirmation but is instead the “value a secured creditor could expect to realize from a vehicle upon foreclosure.” In the absence of “better evidence,” court holds that “the N.A.D.A. Official Used Car Guide Trade Value . . . approximates what a lender might recover from a vehicle through foreclosure.”).

 

33  520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997).

 

34  See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation.

 

35  See examples in § 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders. See also § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA for discussion of failed adequate protection.

 

36  See, e.g., In re Marquez, 270 B.R. 761 (Bankr. D. Ariz. 2001) (Car is valued for confirmation purposes at the petition, and adequate protection payments calculated as 1% of that value are deducted for each month between the petition and confirmation to determine the allowed amount of the secured claim.); In re Farmer, 257 B.R. 556 (Bankr. D. Mont. 2000) (Adequate protection payments prior to confirmation equivalent to the monthly depreciation in the car are credited against the value of the car at the petition to determine the amount of the secured claim at the effective date of the plan.).

 

37  The alternative of requiring regurgitation of the excess adequate protection for distribution consistent with the confirmed plan has not been embraced by the reported decisions on adequate protection in Chapter 13 cases.

 

38  287 B.R. 658 (Bankr. N.D. Tex. 2002).

 

39  287 B.R. at 663.

 

40  287 B.R. at 663.

 

41  287 B.R. at 667.

 

42  11 U.S.C. § 363(e), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 219, 108 Stat. 4106 (1994).

 

43  140 Cong. Rec. H10,769 (section-by-section analysis by Congressman Brooks).

 

44  See § 175.1 [ Fake Leases and Rental Agreements ] § 102.8  Fake Leases and Rental Agreements.

 

45  299 B.R. 684 (Bankr. S.D. Ga. 2003).

 

46  299 B.R. at 685.

 

47  299 B.R. at 686. See also §§ 132.1 [ Nonmonetary Defaults ] § 82.3  Nonmonetary Defaults and 173.1 [ Debtor Must Cure Defaults and Assure Future Performance ] § 102.2  Debtor Must Cure Defaults and Assure Future Performance.

 

48  152 B.R. 309 (Bankr. D. Colo. 1993).

 

49  152 B.R. at 310. Accord Giaimo v. United States (In re Giaimo), 194 B.R. 210, 214 (E.D. Mo. 1996) (Chapter 13 debtor is entitled to turnover of $14,198.18 in bank account at prepetition levy by IRS. “[T]he Bankruptcy Court will have the opportunity to address any adequate protection argument that may be properly raised before it once the funds are made a part of the bankruptcy estate.”); In re Stienes, 285 B.R. 360 (Bankr. D.N.J. 2002) (Plan that would pay taxes in full over time does not provide adequate protection for immediate use of a tax refund held by the IRS; absent proof of adequate protection, IRS does not have to turn over tax refund but is instead granted relief from the stay to exercise its statutory right of setoff.); In re Kirkpatrick, 214 B.R. 314, 316 (Bankr. S.D. Ohio 1997) (IRS’s right of setoff in debtor’s postconfirmation tax refund is subject to stay, and IRS cannot show cause for relief from stay when confirmed plan proposed to pay IRS claims in full; however, tax refund is cash collateral that the debtor cannot use without providing adequate protection to the IRS. “Monies which comprise the refund are cash collateral which provide security for the IRS claim to the extent of the refund amount. Despite the fact that IRS cannot set off the refund against the debtor’s prepetition liability, however, IRS is not required to surrender its collateral (the refund) to the debtor until it has been paid an equivalent amount by the trustee. . . . [I]f the debtor wishes to use the IRS security (the overpayment of tax), the debtor must adequately protect the IRS for that amount.”); In re Olson, 175 B.R. 30, 33 (Bankr. D. Neb. 1994) (IRS is entitled to relief from the stay after confirmation to set off prepetition tax claim against tax refund because debtor has failed to offer adequate protection for the refund. “The debtors did not submit any evidence at the hearing that they could provide the IRS with additional adequate protection of the [$299 tax refund]. . . . If the debtors are going to use the $299 for ordinary living expenses, the debtors must offer new collateral or make cash payments to the IRS equal to the diminution in the value of the collateral as the debtors spend the money. The debtors’ argument that the plan payments will pay the IRS’s claim in full and therefore constitutes [sic] adequate protection of the IRS’s setoff right is without merit.”); Cardillo v. Andover Bank (In re Cardillo), 169 B.R. 8 (Bankr. D.N.H. 1994) (Chapter 13 debtor has a sufficient interest in $7,500 seized from the debtor’s checking account by a creditor prior to bankruptcy that the debtor can use the funds under § 363(b); however, § 363(e) requires the debtor to provide adequate protection to the creditor as a condition for the debtor’s use of the money. Turnover under § 542(a) is delayed pending the debtor’s tender of adequate protection for the money.). See also In re Ennis, 178 B.R. 177 (Bankr. W.D. Mo. 1995) (Creditor is entitled to relief from the stay for cause where former spouse has a lien on the debtor’s entitlement to an inheritance and the debtor has not offered adequate protection for the use of the inheritance to fund the proposed plan.). But see Agricultural Fed. Credit Union v. Harris (In re Harris), 260 B.R. 753, 758 (Bankr. D. Md. 2001) (Credit union is not entitled to adequate protection when debtor deposits money to share account one day after Chapter 13 petition and credit union freezes the account to collect its prepetition credit card debt. “The court finds that the funds deposited post-petition were not cash collateral as defined by 11 U.S.C. § 363(a). Further, the post-petition deposit is not subject to any lien resulting from the Credit Card Agreement pursuant to 11 U.S.C. § 552.”).

 

50  In re Goode, 235 B.R. 584, 589–90 (Bankr. E.D. Tex. 1999) (Debtor had construction business, trucking business and supplied livestock for rodeos. Bank had security interest in $23,142 account receivable that debtor needed to operate. “[T]his Debtor concedes that no traditional forms of adequate protection can be provided to CNB for the use of the cash collateral represented by the Renegade contract proceeds. . . . [N]o additional or replacement liens can be offered. In a feeble effort to comply with the requirement, the Debtor offers simply that, if he is provided an opportunity to use this singular source of cash, there is ‘every reason to believe’ that the Debtor’s business operations will improve. However, based upon the evidence presented, the Court finds that there is not a single reason to believe that such will be the case. The Debtor offered no cohesive financial evidence regarding his business operations. He conceded that he has no real budget or cash flow expectation by which to gauge the ongoing profitability of his business enterprises. . . . Debtor cannot offer any other means by which to protect that creditor’s interest in a meaningful way.”).

 

51  See §§ 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest and 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders.

 

52  See § 43.1 [ First Test of Debtor’s Good Intentions ] § 44.1  First Test of Debtor’s Good Intentions.

 

53  See, e.g., In re Raspberry, 264 B.R. 495 (Bankr. N.D. Ill. 2001) (Adequate protection for a judgment creditor with a continuing lien on the debtor’s wages includes that the debtor “makes plan payments.”); American Honda Fin. Corp. v. Littleton (In re Littleton), 220 B.R. 710, 715 (Bankr. M.D. Ga. 1998) (Debtors will be entitled to turnover of car repossessed before the petition if debtors adequately protect car lender’s interest in the car; adequate protection includes that the debtors make payments required by the proposed plan and that the trustee make monthly distributions to the car lender in accordance with the plan.); In re Cason, 190 B.R. 917, 931–34 (Bankr. N.D. Ala. 1995) (Adequate protection of a car lender is accomplished by periodic payments to the Chapter 13 trustee sufficient to cover monthly depreciation; the payments are accumulated by the Chapter 13 trustee prior to confirmation and distributed with payments under § 1326(b). “When the debtor files her petition, she must make a choice of whether to surrender the collateral or retain and use the collateral, and therefore, upon request, supply the creditor with adequate protection. The Bankruptcy Code imposes a cost on this election. . . . [T]he plan in which the debtor retains the collateral takes into account the possibility of adequate protection payments. It is in partial recognition of this contingency that the debtor makes the payments required by § 1326(a)(1). . . . The secured claim holder, upon request, receives adequate protection of its property interest, with an order fixing the amount of adequate protection for the decline in value and upon the debtor continuing to pay the trustee, pursuant to § 1326(a)(1), on a plan that contains the safeguards in § 1325 and that has a reasonable prospect of being confirmed. . . . [A]dequate protection payments would be paid as payments under the plan pursuant to § 1326. These payments would start to accrue upon motion and be paid post confirmation at the same time as the payment of administrative expenses and trustee fees as provided in § 1326.”).

 

54  See Williams v. IMC Mortgage Co. (In re Williams), 246 B.R. 591, 596 (B.A.P. 8th Cir. 1999) (“IMC had other remedies that were available to it if it thought its collateral inadequate. . . . IMC could have moved for relief from the automatic stay under § 362(d) to foreclose its mortgage, or it could have requested adequate protection under § 363(e). . . . If a creditor fails to seek adequate protection payments, nothing in § 503 suggests that an administrative expense priority is intended as an alternative remedy to adequate protection.”).

 

55  See 11 U.S.C. § 363(c)(2). See, e.g., In re Goode, 235 B.R. 584 (Bankr. E.D. Tex. 1999) (Business debtor’s motion to use cash collateral is denied because debtor cannot provide adequate protection.).

 

56  See §§ 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance, 52.1 [ Turnover of Property ] § 50.1  Turnover of Property and 75.1 [ Examples of Stay Violations, and Not ] § 62.1  Examples of Stay Violations, and Not. See, e.g., TranSouth Fin. Corp. v. Sharon (In re Sharon), 234 B.R. 676 (B.A.P. 6th Cir. 1999) (Creditor violated automatic stay by refusing turnover of repossessed car based on creditor’s subjective belief in the inadequacy of the tendered adequate protection.); In re Garcia, 276 B.R. 699, 706 (Bankr. S.D. Fla. 2002) (Decided before Bell-Tel Federal Credit Union v. Kalter (In re Kalter), 292 F.3d 1350 (11th Cir. 2002), creditor cannot use adequate protection as an excuse for not turning over a repossessed car. “[T]he Creditor is using lack of adequate protection defensively, as a reason for withholding property of the Debtor’s bankruptcy estate. This tactic is procedurally improper. If the Creditor wishes to re-raise an alleged lack of adequate protection properly, it may do so in a later filed motion for relief from stay, or motion to condition continued use of estate property.”); In re Jackson, 251 B.R. 597, 600–01 (Bankr. D. Utah 2000) (Creditor that repossessed the debtor’s car before the petition cannot demand adequate protection as a condition for turnover. “A creditor’s duty to return a vehicle repossessed prepetition is not dependent on the receipt of adequate protection or proof of insurance. . . . For a secured creditor to withhold property of the estate until the debtor complies with the creditor’s demand for adequate protection permits the creditor to unilaterally determine the amount, type and sufficiency of adequate protection. It is the duty of the court, not the privilege of the creditor, to determine what adequate protection is appropriate.”). But see Nash v. Ford Motor Credit Co. (In re Nash), 228 B.R. 669, 673–74 (Bankr. N.D. Ill. 1999) (Car repossessed before the petition remains property of the estate and debtor has standing to bring turnover action under § 542; however, creditor does not violate stay by refusing turnover until adequate protection rights are determined by the court after trial. “[O]ther opinions have found that a creditor may retain possession of collateral repossessed pre-petition until adequate protection is provided or offered. . . . The latter viewpoint is better reasoned; the creditor’s property rights merit protection when it turns over possession of an automobile to the debtor. Thus, a creditor that repossesses estate property pre-petition is under no obligation to return the property post-petition until and unless adequate protection is provided. . . . While Debtor has alleged that her plan will provide adequate protection for FMC’s interest, that plan has not yet been confirmed. The delay in confirming may reflect problems in plan feasibility to be explored at trial, and we must ascertain whether promised payments under Debtor’s Chapter 13 Plan have been made. Indeed, the level of protection required is an issue for trial. Is Debtor’s promise to maintain full-comprehensive vehicle insurance along with her plan to pay FMC’s allowed secured claim sufficient? As of what date should such protection be offered and measured? Does Debtor need to reimburse FMC for costs involved with the repossession and storage of her vehicle before and also after Debtor demanded the car back?”).

 

57  462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983).

 

58  462 U.S. at 211–12.

 

59  See §§ 52.1 [ Turnover of Property ] § 50.1  Turnover of Property and 75.1 [ Examples of Stay Violations, and Not ] § 62.1  Examples of Stay Violations, and Not. See, e.g., In re Jackson, 251 B.R. 597, 600–01 (Bankr. D. Utah 2000) (Creditor that repossessed the debtor’s car before the petition cannot demand adequate protection as a condition for turnover. “A creditor’s duty to return a vehicle repossessed prepetition is not dependent on the receipt of adequate protection or proof of insurance. . . . For a secured creditor to withhold property of the estate until the debtor complies with the creditor’s demand for adequate protection permits the creditor to unilaterally determine the amount, type and sufficiency of adequate protection. It is the duty of the court, not the privilege of the creditor, to determine what adequate protection is appropriate.”).

 

60  See §§ 67.2 [ Adequate Protection Rights ] § 57.2  Adequate Protection Rights and 81.1 [ Lack of Adequate Protection ] § 64.1  Lack of Adequate Protection.

 

61  11 U.S.C. § 363(e), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 219, 108 Stat. 4106 (1994).

 

62  See 140 Cong. Rec. H10,769 (“§ 363(e) is . . . amended to clarify the lessor’s interest is subject to ‘adequate protection.’ Such remedy is to the exclusion of the lessor’s being able to lift the automatic stay under § 363 [sic].”) (section-by-section analysis by Congressman Brooks).

 

63  See below in this section and § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA. See, e.g., Williams v. IMC Mortgage Co. (In re Williams), 246 B.R. 591 (B.A.P. 8th Cir. 1999) (Mortgage holder that failed to request adequate protection is not entitled to an administrative expense in the funds held by the trustee at dismissal before confirmation.); Tidewater Fin. Co. v. Henson, 272 B.R. 135 (D. Md. 2001) (Furniture lender’s failure to move for relief from the stay or for adequate protection precludes allowance of an administrative expense when collateral depreciates after confirmation but debtor fails to make payments.), aff’d, No. 02-1126, 2003 WL 122503 (4th Cir. Jan. 15, 2003) (unpublished); In re Robinson, 225 B.R. 228 (Bankr. N.D. Okla. 1998) (Car lender that did not ask for adequate protection is not entitled to an administrative expense for repossession expenses or attorney fees nor for depreciation that may have occurred after the petition.); In re Cook, 205 B.R. 437 (Bankr. N.D. Fla. 1997) (Chapter 13 debtor is required to make adequate protection payments to a car lender only upon request by the lienholder.); In re Cason, 190 B.R. 917 (Bankr. N.D. Ala. 1995) (Adequate protection requirement for a car lender is triggered by motion for adequate protection or for stay relief.).

 

64  See § 216.1 [ Timing of Hearing on Confirmation ] § 115.1  Timing of Hearing on Confirmation before BAPCPA. See, e.g., In re Rogers, 239 B.R. 883, 886–90 (Bankr. E.D. Tex. 1999) (Adequate protection for car lender in a delayed confirmation district includes maintaining full coverage insurance, staying current in payments to the trustee, limiting administrative expenses including attorney fees to one-half of distributions once the plan is confirmed and in the event of conversion or dismissal, lienholders have a claim against money held by the trustee. “[T]he Eastern District of Texas has historically been what is denominated in Chapter 13 phraseology as a ‘late confirmation’ district. . . . Other bankruptcy courts . . .  have chosen to accelerate the scheduling of Chapter 13 confirmation hearings . . . . Undoubtedly some of those districts have accelerated the confirmation hearing date in order to resolve the problems addressed by this Court today . . . . Even if the Chapter 13 plan is confirmed, it activates what has developed into an almost universal plan provision in this district; that first available funds distributed by the Chapter 13 Trustee will go to the payment of the fees for the debtor’s attorney. There is nothing impermissible about this provision and, in fact, it is expressly authorized, though not mandated, by § 1326(b)(1) of the Bankruptcy Code. However, depending on the size of the monthly plan payment being paid by a debtor, it is undoubtedly true that a secured creditor is often not paid from the first distributions arising from a confirmed plan in this district, despite the fact that its collateral has been used throughout the pre-confirmation period without remuneration of any kind. . . . [A] secured party has a right to adequate protection of its interests as provided by §§ 361–363 of the Code. Yet § 1326(a)(2) mandates that the trustee retain all plan payments until confirmation or denial of confirmation of a plan. . . . While prompt compensation of professionals is certainly one objective of the Bankruptcy Code, the protection of creditor interests is given an equivalent degree of prominence, and there is nothing in the Bankruptcy Code which prohibits a more equitable distribution of the plan payments upon confirmation. In fact, § 1326(b) specifically authorizes the payment of administrative claims either ‘before or at the time of each payment to creditors under the plan.’ It is undoubtedly true that a delay in the receipt of plan payments is a necessary consequence in a ‘late confirmation’ district. However, under circumstances in which a creditor’s interest is deserving of additional protection, as in this case, to add to that delay by preventing the receipt of any payment by a secured creditor in deference to the full and complete payment of professional fees is inconsistent with provisions of the Bankruptcy Code and can no longer be endorsed by this Court. Accordingly, the Debtor in this case shall be required to modify her Chapter 13 plan to provide that, following payment of the percentage fee fixed and knowing to the Chapter 13 Trustee under 28 U.S.C. § 586(e)(1) and (2), the funds to be distributed under the confirmed plan shall be halved, with one-half (½) of such funds to be distributed equally among the Bank and any other party authorized to share in such a distribution pursuant to an order of this Court; and the remaining one-half (½) of such funds to be distributed equally among the attorney for the Debtor and any other holder of an unpaid claim of the kind specified in § 507(a)(1) of the Bankruptcy Code, with such division of funds to continue until such time as the unpaid claims under § 507(a)(1) have been paid in full. . . . [T]he significance to that secured creditor of the debtor’s ability to perform his plan obligations can be increased by requiring the debtor to tender to that creditor the right to a share of the funds held by the Chapter 13 trustee, in the event that the Chapter 13 case is dismissed or converted. By allowing a secured creditor to receive an equivalent share of the accumulated plan proceeds on an equivalent basis with any similarly-situated secured party, as well as any holder of an unpaid § 503(b) administrative claim, the risk of failure in the case is more equally reapportioned and the adequacy of that creditor’s protection is undoubtedly elevated.”).

 

65  See § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA.

 

66  See, e.g., Grundy Nat’l Bank v. Rife, 876 F.2d 361 (4th Cir. 1989) (On unusual facts, bank is entitled to administrative expense claim where the debtor used the creditor’s automobiles for nine months without making payments required by the plan and the creditor was not allowed relief from the stay to liquidate its collateral. The court also allowed the bank interest on the revenues it would have received had the debtor timely made payments under the plan.); In re Johnson, 247 B.R. 904, 909–11 (Bankr. S.D. Ga. 1999) (At modification after confirmation when the debtors surrender collateral and reconsider the deficiency as an unsecured claim under § 502(j), creditor may be entitled to an administrative expense if adequate protection failed between confirmation and modification. “Each secured claim is, in theory, adequately protected because the payment of the debt through the plan keeps pace with the depreciation of the collateral. However, the existence of a deficiency amount demonstrates that the creditor’s claim was not adequately protected. . . . Therefore, the creditor may seek allowance of a claim for an administrative expense caused by this failure of adequate protection. 11 U.S.C. § 503(b) . . . . Foreclosure value, not replacement value, should be the basis of the super priority administrative expense claim. The debtor’s payments on the secured claim and the cash received from the postconfirmation sale of the collateral should both be subtracted from that foreclosure value. The resulting dollar amount is the creditor’s allowable super priority administrative expense for failure of adequate protection. . . . The administrative expense claim merely compensates the creditor for the unpaid devaluation of the collateral during the time that the debtor had the use of it.”); In re Allen, 240 B.R. 231, 236 (Bankr. W.D. Va. 1999) (In a Chapter 13 case that reached confirmation 16 months after filing and without discussion of adequate protection, when debtor surrenders car, lender is entitled to an administrative expense for the difference between the liquidation value of the car at the petition and the liquidation value realized by the creditor after surrender. “The correct standard for this purpose is the net fair liquidation value of such vehicle as of the date of filing. To the extent that this value exceeds the net fair liquidation value of this vehicle when it was actually surrendered to KEMBA, such creditor, upon application, proper notice and satisfactory evidence or upon confirmation of a plan providing to such effect, will be entitled to an award of an administrative expense against the estate for the difference. See Grundy Nat. Bank v. Rife, 876 F.2d 361, 363–64 (4th Cir. 1989).”); In re Cason, 190 B.R. 917, 931–34 (Bankr. N.D. Ala. 1995) (“The secured claim holder, upon request, receives adequate protection of its property interest, with an order fixing the amount of adequate protection for the decline in value and upon the debtor continuing to pay the trustee, pursuant to § 1326(a)(1), on a plan that contains the safeguards in § 1325 and that has a reasonable prospect of being confirmed. . . . [A]dequate protection payments would be paid as payments under the plan pursuant to § 1326. These payments would start to accrue upon motion and be paid post confirmation at the same time as the payment of administrative expenses and trustee fees as provided in § 1326. Insufficiency of funds would require the standing trustee to make a pro rata distribution. In the event confirmation is denied, claimholders whose adequate protection failed would be entitled to superpriority pursuant to § 507(b) (which would allow payment of accrued adequate protection ahead of other administrative expenses).”); GMAC v. Johnson (In re Johnson), 145 B.R. 108, 114 (Bankr. S.D. Ga. 1992) (Between filing and confirmation, debtor provides adequate protection to each secured claim holder “by making preconfirmation payments to the Chapter 13 trustee . . . . Upon confirmation . . . these accumulated funds are distributed pursuant to the plan . . . . If at confirmation the court determines a secured creditor’s collateral is worth less at confirmation than its value on the date the bankruptcy petition was filed, that is, if after the fact the protection provided the secured party through plan payments proves to be inadequate, the creditor is entitled to a priority expense claim, a ‘superpriority’ payable ahead of all other administrative expense claims, to the extent of the failure of adequate protection.”), rev’d, 165 B.R. 524 (S.D. Ga. 1994).

 

67  See § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA. See, e.g., Williams v. IMC Mortgage Co. (In re Williams), 246 B.R. 591, 596 (B.A.P. 8th Cir. 1999) (Mortgage holder that failed to request adequate protection is not entitled to an administrative expense in the funds held by the trustee at dismissal before confirmation. “IMC had other remedies that were available to it if it thought its collateral inadequate. . . . IMC could have moved for relief from the automatic stay under § 362(d) to foreclose its mortgage, or it could have requested adequate protection under § 363(e). . . . A prepetition secured creditor’s remedy for use and depreciation of its collateral during the bankruptcy is through a request for adequate protection, not an administrative expense. . . . If a creditor fails to seek adequate protection payments, nothing in § 503 suggests that an administrative expense priority is intended as an alternative remedy to adequate protection.”); Tidewater Fin. Co. v. Henson, 272 B.R. 135, 139–40 (D. Md. 2001) (Furniture lender’s failure to move for relief from the stay or for adequate protection precludes allowance of an administrative expense when collateral depreciates after confirmation but debtor fails to make payments. “[I]n most cases, § 503(b) is not the appropriate remedy for a prepetition secured lender whose collateral diminishes in value due to a debtor’s postpetition possession and use. . . . The appropriate redress for a creditor in such a predicament is adequate protection. . . . Tidewater could have requested adequate protection from the court either when Smith filed her petition, or after she defaulted under her payment plan. . . . [T]he Code expressly indicates that a creditor must request adequate protection in order to be afforded such relief. . . . [H]aving failed to request adequate protection as the appropriate remedy, Tidewater may not now ‘use § 503(b) as an alternate means’ to accomplish the same end.”), aff’d, No. 02-1126, 2003 WL 122503 (4th Cir. Jan. 15, 2003) (unpublished) (Confirmation of a Chapter 13 plan is not a postpetition transaction for purposes of the two-part test for allowance of an administrative expense; the “narrow exception” for collateral used in the operation of business or for an economic profit identified in Grundy National Bank v. Rife, 876 F.2d 361 (4th Cir. 1989), was not proven with respect to the computer and furniture.); In re Robinson, 225 B.R. 228, 233 (Bankr. N.D. Okla. 1998) (Car lender is entitled to adequate protection only if car lender moves for adequate protection. Car lender that did not ask for adequate protection is not entitled to an administrative expense for repossession expenses or attorney fees nor for depreciation that may have occurred after the petition. “AFG did not seek an order of adequate protection in this case; instead, AFG sought and obtained relief from the automatic stay. . . . Having failed to request adequate protection, AFG may not use § 503(b) as an alternate means to the same end.”); In re Severson, 53 B.R. 8 (Bankr. D. Or. 1985) (Section 507(b) does not allow administrative priority or superpriority when adequate protection fails because creditor failed to demonstrate actual, necessary expenses of preserving the estate between the petition and the confirmation order.).

 

68  See Grundy Nat’l Bank v. Rife, 876 F.2d 361 (4th Cir. 1989).

 

69  Tidewater Fin. Co. v. Henson, No. 02-1126, 2003 WL 122503 (4th Cir. Jan. 15, 2003) (unpublished). See § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA.

 

70  See §§ 43.5 [ Return of Payments to Debtor ] § 44.5  Return of Payments to Debtor, 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA, 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994 and 338.1 [ In General ] § 153.1  In General.

 

71  See § 216.1 [ Timing of Hearing on Confirmation ] § 115.1  Timing of Hearing on Confirmation before BAPCPA.

 

72  See § 43.1 [ First Test of Debtor’s Good Intentions ] § 44.1  First Test of Debtor’s Good Intentions.

 

73  Nash v. Ford Motor Credit Co. (In re Nash), 228 B.R. 669, 674 (Bankr. N.D. Ill. 1999) (“While Debtor has alleged that her plan will provide adequate protection for FMC’s interest, that plan has not yet been confirmed. The delay in confirming may reflect problems in plan feasibility to be explored at trial, and we must ascertain whether promised payments under Debtor’s Chapter 13 Plan have been made.”); Hooper v. United States (In re Hooper), 152 B.R. 309, 310 (Bankr. D. Colo. 1993) (“The IRS levy of prepetition wages gave it a secured interest in those wages. It did not give the IRS title to those funds, however, and the IRS is required to turnover those funds to the estate if the Debtor provides adequate protection. . . . [T]he Debtor claimed that his proposed Chapter 13 plan provides for payment of the IRS claim, and therefore the IRS is adequately protected. The Court disagrees. The plan must pay first the administrative priority claims, i.e., the fees of the Chapter 13 Trustee, before the IRS receives payment. In addition, it is the Debtor’s absolute right to dismiss this Chapter 13 case at any time. . . . It is quite possible that as soon as the IRS pays these funds to the Chapter 13 Trustee, the Debtor could dismiss the case and the funds would be given back to the Debtor. We are not dealing with a piece of tangible personal property here, such as an automobile, but rather with cash. If it was just an automobile, the Debtor’s plan may very well provide adequate protection. But when the property at issue is cash, it is very difficult for this Court to find that a promise to pay the cash in the future is adequate protection for a creditor with the cash in hand at present.”); In re Hinckley, 40 B.R. 679 (Bankr. D. Utah 1984). See also In re Olson, 175 B.R. 30, 33 (Bankr. D. Neb. 1994) (Even a confirmed plan that proposes to pay the IRS’s claim in full does not constitute adequate protection of the IRS’s setoff right in the debtors’ tax refund. If the debtors are going to use the tax refund, they must either offer new collateral or make cash payments to the IRS that equal the “diminution in the value of the collateral as the debtors spend the money.”).