Local Rule Rule 4001-2: TERMS OF CASH COLLATERAL/DEBTOR-IN-POSSESSION FINANCING

Rule 4001-2 TERMS OF CASH COLLATERAL/DEBTOR-IN-POSSESSION FINANCING A. In Chapter 13 Cases. 1. Need for a Motion. Notwithstanding any provision in a chapter 13 plan, any post-petition extensions of credit or refinancing of property of the debtor or debtor's estate shall be brought by motion in accordance with the Fed. R. Bankr. P. and the LBR. Such motion shall be served on all parties in interest including the chapter 13 trustee. 2. Real Estate Financing. A motion seeking approval of real estate mortgage financing/refinancing shall include the following information: a. the identity of the property that is the subject of the financing/refinancing; b. the identity of the source of funds; c. a description of the terms of the financing/refinancing including: i. whether it will be a first mortgage on the subject property, ii. the amount of principal borrowed, iii. the interest rate (and default rate, if any), iv. the term of the loan and amortization schedule, v. the amount of the monthly payment, and vi. all other material terms. d. whether the new mortgage financing/refinancing is to be incorporated into the existing chapter 13 plan or is designed to complete payments under the plan. e. the status of plan payments at the time that the motion is filed; f. if a discharge is sought through the financing, whether the provisions of 11 U.S.C. § 1328 are met; g. the date the loan is expected to close; and h. the effect of the transaction on the plan. 3. Vehicle financing. A motion seeking approval of motor vehicle financing shall include the following information: a. the type and cost of the vehicle being purchased; b. the source of funds; c. the terms of financing, including: i. the principal borrowed, ii. the interest rate (and default rate, if any), iii. the term of the loan and amortization schedule, iv. the amount of the monthly payment, and v. all other material terms. d. how the new payment will be incorporated into the chapter 13 plan; e. the status of plan payments at the time that the motion is filed; f. whether any further plan modification is necessary; g. the date the loan is expected to close; h. if the treatment of other creditors will be changed as a result of the financing, a statement of the rationale and underlying facts in support of that change; i. if the plan payment is to be changed as a result of the financing, sufficient facts to demonstrate the feasibility of the plan as amended; j. whether the standards of 11 U.S.C. § 1325(b) are met; and k. whether and when an amended or modified plan will be filed.

B. In Chapter 11 Cases. 1. Motion, Service: All motions for approval of an agreement for use of cash collateral or debtor-in-possession financing shall have a complete copy of the agreement filed as an attachment to the motion without regard to page limitations in the LBR and shall be served in accordance with Fed. R. Bankr. P. 4001 and 2002. 2. Contents of Motion: Any motion for use of cash collateral or debtor-in-possession financing must contain the following provisions: a. A statement that: i. there has been compliance with service requirements; ii. the secured creditor asserts a priority lien in the cash collateral or other assets of the debtor, together with a specific identification of the assets that are generating or will generate cash collateral (i.e., cash on hand, proceeds of inventory sales, etc.), and the amount of the indebtedness allegedly secured; iii. the debtor has an immediate need for the use of cash collateral or the debtor-in-possession financing to preserve its assets, fund its business operations, purchase inventory, etc.; and iv. any reaffirmation by the debtor of existing terms and conditions of existing financing documents with secured creditors is not binding on any other party including any creditor or creditors' committee. b. A statement of what relief is being accorded to the pre-petition secured creditor, including whether or not the stipulation i. grants any adequate protection to the secured creditor (and its successor and assigns) pursuant to § 361 and § 363, including monthly adequate protection payments (if appropriate), subject to later allocation as to fees, interest and principal contingent upon results of § 506(a) motions, if any; ii. grants the secured creditor any replacement liens in post-petition assets, which may only be to the same extent and priority as its liens existed at the date of bankruptcy and to the extent that the use of cash collateral or debtor-in-possession financing results in a diminution in the secured creditor's position; iii. grants the secured creditor a super-priority administrative claim to the extent of the diminution in the value of the secured creditor's collateral after the date of bankruptcy; iv. provides for establishment of a segregated DIP account into which cash collateral and the debtor-in-possession financing should be deposited; v. restricts the use of cash collateral or the financing to pay specified categories of operating expenses, per budgets to be attached to the proposed order; vi. requires that the Debtor maintain insurance; vii. requires submission of periodic (weekly, bi-weekly, monthly) reports regarding the use of cash, aging of accounts receivable, etc.; viii. provides for the equality of treatment for carve-outs as between professionals for the debtor and professionals for the committee of unsecured creditors (or other committees) and other post-petition creditors; ix. provides that the pre-petition liens of the secured creditor shall be continued post-petition as to both pre-petition and post-petition assets but only to the extent of the value of the pre-petition assets at the time of the filing of the bankruptcy petition, plus accruals and advances thereafter, and minus payments to the secured creditor thereafter. No additional financing statements or mortgages need be filed to perfect such post-petition liens and security interests (but may be filed if the secured creditor chooses); x. identifies the time period to which the Order is applicable and provides that even if authorization to use cash collateral or the financing expires, adequate protection/liens will continue to be effective until/unless otherwise modified by the Court; and xi. sets a final hearing date and provides that summaries of documents relied upon by the secured creditor in asserting its perfected security interest shall be filed with the Clerk by such date. The summaries shall comply with the Court's ECF System. 3. The following provisions should not be included in any interim order for use of cash collateral or debtor-in-possession financing, and if requested at the final hearing must be highlighted in bold in the motion: a. stipulations as to the perfection, validity or priority of secured claims that are binding on any party other than the debtor, without affording other interested parties a reasonable time to challenge same; b. stipulations which reduce the time period within which parties in interest can challenge the perfection, validity, priority or amount of secured claims to (i) less than ninety (90) days from the engagement of counsel for the committee of unsecured creditors or, if no counsel or no committee is appointed, (ii) less than 120 days after the case is filed; c. in cases where the secured creditor asserts liens on accounts receivable pursuant to asset-based revolving credit facilities, provisions which recharacterize the "use of cash collateral" into "post-petition advances," without regard to whether the so called "post-petition advance" is a new loan or the use of a prepetition receivable; d. provisions which release potential claims or causes of action by the estate against the lender; e. provisions which grant automatic relief from stay upon a material default under the cash collateral order (but secured creditor's entitlement to an expedited hearing in the event of a material default could be recognized); f. provisions which grant cross-collateralization on unencumbered assets, including avoidance actions, absent extraordinary circumstances; g. provisions which seek to waive whatever rights the estate may have under 11 U.S.C. § 506(c); h. provisions that deem pre-petition secured debt to be post-petition secured debt or that use post-petition loans from a pre-petition secured creditor to pay all or part of that creditor's pre-petition debt, other than as provided in 11 U.S.C. § 552(b); i. provisions that give disparate treatment for the professionals retained by the committee and the debtor with respect to the professional fee carveout; or j. provisions that prime any other secured creditor without that creditor's consent.