A secured creditor in a Chapter 11 reorganization, whether holding a first mortgage lien on real estate or a UCC-9 blanket lien on all personal assets, has available many arrows in its quiver to protect its rights.
They include seeking relief from the automatic stay in order to foreclose upon its collateral, dismissal of the debtor’s case as a bad-faith filing and requiring the debtor to provide it with adequate protection for the use of its collateral. Another viable, well-targeted but underutilized “arrow” is the secured creditor’s ability to propose and confirm its own plan of liquidation—an orderly disposition of the collateral securing its debt for the benefit of all creditors, often over a debtor’s objection. This article addresses exactly how, and when, a secured creditor may implement this creative solution, as well as the impediments it may encounter.
