Authority of Debtor in Possession to Use Business Assets

The video tutorial explains the authority of a debtor in possession to use the assets of an estate in business operations, highlighting the reasons for their role over a trustee. It covers the use of business assets in the ordinary course, potential challenges by creditors, and the need for court approval when assets are impaired. The concept of adequate assurance is discussed, including its forms such as payments or liens. The video also addresses the priority given to secured creditors when their claims are fully secured, including potential benefits like priority in attorneys fees.

What is the primary reason a debtor in possession is preferred over a trustee?

• Debtor in possession can sell assets more easily.

• Debtor in possession is in the best position to continue business operations.

• Trustees are not allowed to use cash assets.

• Debtor in possession can avoid court approvals.

What must the court do if a debtor in possession wants to sell an asset that impairs a creditor's claim?

• Ignore the creditor's claim.

• Automatically approve the sale.

• Require the debtor to provide adequate assurance of payment.

• Allow the creditor to take over the asset.

What is one form of adequate assurance that a court might require?

• A promise to pay in the future.

• A secondary lien on other property of the estate.

• A verbal agreement with the creditor.

• A reduction in the debtor's salary.

When can a secured creditor receive priority in their attorney's fees?

• When the debtor in possession requests it.

• When the creditor's collateral is worth more than their claim.

• When the court orders a sale of the asset.

• When the creditor agrees to a lower interest rate.

What benefit does a secured creditor have if their collateral is worth more than their claim?

• They can receive priority in fees and expenses.

• They can take ownership of the debtor's business.

• They can demand immediate payment.

• They can avoid court proceedings.