In a recently released unanimous decision, the Supreme Court has ruled that only a trustee has standing to surcharge a secured creditor's collateral under Section 506(c) of the Bankruptcy Code. Hartford Underwriters Insurance Company v. Union Planters Bank, N.A., (In re Hen House Interstate, Inc.) 2000 WL 684180. The decision brings a decisive halt to the parade of creditors seeking payment of their administrative claims as a cost of preserving a secured creditor's collateral. From now on, only the trustee can bring these claims.
Benefitting Secured Creditors
A harsh fact of life for unsecured creditors, and clear principle of bankruptcy law, is that secured creditors must come first. Thus, when all of a debtor's assets are pledged, and the value of those assets are insufficient to pay secured claims in full, nothing will be available for payment to unsecured creditors. The one exception to this rule is § 506(c), and it provides that a secured creditor's collateral can be surcharged
