What is Cash Collateral in a Chapter 11 Bankruptcy?
Is your South Florida business considering a Chapter 11 bankruptcy filing? If so, it is important to learn as much as you can about the process and to work with an experienced West Palm Beach bankruptcy attorney from the start. There are many terms that will arise that may not be familiar to you in the bankruptcy context, including the use of the term “cash collateral.” While this might have particular meaning outside the context of a business bankruptcy filing, it has a very specific meaning in reorganization bankruptcy. What do you need to know about cash collateral in a Chapter 11 bankruptcy? Consider the following information from the South Florida bankruptcy lawyers at Kelley Kaplan & Eller.
Definition of “Cash Collateral” in the US Bankruptcy Code
Section 363(a) of the US Bankruptcy Code expressly defines “cash collateral” as follows:
“Cash collateral means cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents, or profits of property and the fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a security interest . . . whether existing before or after the commencement of a case under this title.”
Why does the Bankruptcy Code’s definition of cash collateral matter in a Chapter 11 case? In short, the definition clarifies what constitutes the cash of the estate, and this is critical to know because it cannot be spent without consent during the bankruptcy case. Accordingly, once your business files for bankruptcy, it is critical to avoid spending any cash or cash equivalents (i.e., cash collateral) without first ensuring that your business is permitted to spend it. By having a bankruptcy lawyer working with your business, you can ask any questions to have certainty prior to making any expenditures once the Chapter 11 petition has been filed.
Bankruptcy Rule for Cash Collateral
When your business files for Chapter 11 bankruptcy, all of the property owned by your business at the time of filing will become part of the bankruptcy estate — this includes all property owned as cash or cash equivalents, or what the Bankruptcy Code defines as “cash collateral.”
Under the Bankruptcy Code, a Chapter 11 debtor cannot spend any cash collateral without a court order or without obtaining consent from all of the parties with interest in the collateral.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Chapter 11 bankruptcies involve a range of complexities, but you can ensure that your business’s Chapter 11 bankruptcy goes smoothly by working with an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan & Eller. We can guide your business through all aspects of your reorganization bankruptcy, can answer any questions you have, and can attend to any issues that may arise during the bankruptcy process. Contact us today for more information about how we can assist you.
Source:
law.cornell.edu/uscode/text/11/363
