What is “adequate protection” in a Chapter 11 bankruptcy?

Adequate protection is a key concept in Chapter 11 bankruptcy law in Washington. When a debtor is attempting to reorganize and pay off debt under Chapter 11, they need to have adequate protection to ensure that their creditors will be repaid. Adequate protection in Chapter 11 bankruptcy is a provision for a debtor to protect their assets, including property that may be sold to cover debts. This protection can come in various forms, such as the debtor’s payment of certain administrative claims, a portion of cash payments for existing debts, or approval of a proposed payment plan for creditors. By providing adequate protection for creditors, they are ensured that their interests will be met if the debtor does not have the necessary funds to pay off their debts from liquidated assets. This helps to ensure that the debtor’s property is not sold off to pay creditors and encourages creditors to allow the debtor to attempt to reorganize. In addition, adequate protection also helps to ensure that the debtor’s assets are used in a fair and equitable manner. If a debtor does not provide adequate protection for their creditors, then the court may decide that the proposed reorganization is not feasible and could potentially order the liquidation of certain assets to pay off the creditors. In summary, adequate protection is an important part of Chapter 11 bankruptcy law in Washington. This protects creditors and ensures that the debtor’s property is used in a fair and equitable manner. Adequate protection enables a debtor to reorganize and pay off their debts in an orderly fashion while protecting the interests of creditors.

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What is “adequate protection” in a Chapter 11 bankruptcy?

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