What is a “cash collateral motion” in a Chapter 11 bankruptcy?

A cash collateral motion in a Chapter 11 bankruptcy in Alaska is a motion that must be filed in order for a debtor to use cash or cash equivalents belonging to a creditor or trustee as collateral for the debtor’s operations. The debtor must demonstrate that the use of the cash collateral is necessary for the successful and efficient reorganization of the business. A cash collateral motion can be requested by the debtor in order to gain approval for the continued use of its own funds or funds of a creditor or trustee as a security for its obligations. To receive approval, the debtor must demonstrate that the cash collateral is necessary for the orderly operation of the business during the reorganization process, for instance if the debtor needs funds to pay creditors. The debtor is then usually required to provide a security agreement that outlines the terms of repayment of the secured funds. Furthermore, a cash collateral motion typically requires the debtor to offer a variety of protections for creditors, such as adequate protection payments. This is to ensure that the value of the collateral is not depreciated during the reorganization process. In most cases, a court order is required for a debtor to use cash collateral for the reorganization process. In Alaska, the United States Bankruptcy Court must approve the cash collateral motion, after evaluating the necessity of the use of the funds, for the court to provide the necessary authorization.

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What is a “cash collateral motion” in a Chapter 11 bankruptcy?

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