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Cash Collateral & Reorganization Penalties

Cash Collateral in Chapter 11 Bankruptcy

Questions about Cash Collateral? Our Los Angeles Bankruptcy Attorneys have Answers.

If you have questions about cash collateral in Chapter 11 bankruptcy, Weintraub & Selth, APC, is well-qualified to provide clear answers. Our bankruptcy lawyers have decades of experience helping businesses emerge from financial challenges. If bankruptcy is the right path for you and your business, we will be your guides. However, we may be able to offer many suggestions for how you might avoid bankruptcy. We may also offer the kind of advice you need if you are already in the midst of the bankruptcy process.

Call us for a free and no-obligation consultation with your questions about cash collateral in Chapter 11 bankruptcy or any other questions about the bankruptcy process: (310) 220-4147.

Debtor in Possession

Chapter 11 allows a business owner to enter into a reorganization plan with creditors allowing the business to continue operating. The formulation of this plan and acceptance by creditors rarely happen before the bankruptcy case is filed. During the time between the filing of a Chapter 11 bankruptcy petition and the confirmation of a reorganization plan, business continues as usual, subject to certain reporting requirements. The business owner is then acting as a “debtor in possession.”

Although the debtor in possession may continue to use assets in the ordinary course of business, there are restrictions on the use of cash collateral and penalties for not adhering to the restrictions. Consulting with a qualified Los Angeles business bankruptcy attorney at Weintraub & Selth, APC can help you avoid problems in accessing cash for your business. Our lawyers have been guiding business owners through this process for decades and have been extremely successful in helping businesses become profitable again.

What Is Cash Collateral?

Cash collateral is defined under the bankruptcy code as:

  • Cash
  • Accounts
  • Rents
  • Proceeds
  • Securities
  • Accounts receivable in which a creditor has perfected security interest, or lien

Because cash is often the lifeblood of a business, a motion to use cash collateral is often filed concurrently with the bankruptcy petition. The issue of cash collateral use must be resolved to the satisfaction of all parties early in a Chapter 11 bankruptcy for the business to continue operating. Not all creditors will agree to the terms. However, an experienced bankruptcy attorney at a reputable law firm can greatly improve your chances of securing the most attractive terms.

The bankruptcy court will determine if the secured creditors’ interest is adequately protected when the business owner uses or spends cash collateral and will approve an operating budget for the debtor’s use of the funds. The unauthorized use of cash collateral can carry significant penalties. Your risks, however, can be significantly reduced with the right counsel.

Adequate Creditor Protection and Debt Negotiations: We Offer Comprehensive Legal Representation

Emerging from bankruptcy can be complex and requires the insight of a knowledgeable bankruptcy lawyer in Los Angeles. We can adeptly navigate the bankruptcy court system to make sure your business has access to the cash and collateral it needs.

To continue operations through a Chapter 11 filing and emerge from the bankruptcy case with a successful reorganization, contact us today for a consultation on the specifics of your business bankruptcy case.

Your initial consultation is free, and we will provide the peace of mind that comes from speaking with highly experienced attorneys.

Hear from People We've Helped

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