Developments of Note
U.S. Supreme Court Holds that Only Trustees or Debtors May Use Section 506(c) of the Bankruptcy Code to Surcharge Collateral
A bankruptcy trustee or debtor in possession in a Chapter 11 reorganization proceeding enjoys the power to recover expenses paid to preserve or dispose of a lender’s collateral -- even if the lender has not consented to those expenses. To the extent the expenses benefit the collateral, they may be paid. 11 U.S.C. §506(c). Unsecured creditors holding post-bankruptcy claims frequently sought to reach secured creditors’ collateral for payment of their administrative claims in cases where other assets were insufficient to pay their claims. Section 506(c) was their opening.
