Common Issues in Reorganization Cases
Cash collateral, the automatic stay, lien avoidance, preferences, and plan confirmation, the recurring issues in every Chapter 11, 12, and 13.
Keeping the business running while you reorganize.
Almost every reorganization opens with the same question: can the debtor use cash that secures a creditor's claim, the rents, receivables, crop proceeds, or revenue, to keep operating?
The court will only authorize use of cash collateral if the debtor's motion is built on solid projections and the secured creditor is adequately protected. Get this right and the case has a foundation; get it wrong and the case stalls before it starts.
What goes into the motion and the order.
Two checklists side by side: what the debtor must put in the motion, and what the court typically requires in the order.
Crop yields, including market price, other income, and operating expenses
Business revenue projections supported by historical data
Source of supplies and inputs needed to keep operating
Marketing outlet for the product or crop
Availability of insurance on the collateral
Attempts to find alternative sources of financing
Debtor's capacity to actually perform on the projections
Value of the creditor's collateral
When creditors push to take the collateral back.
Secured creditors can file a motion under § 362(d) asking the court to lift the automatic stay so they can pursue collateral. They typically argue lack of adequate protection, no equity, or that the property isn't necessary for an effective reorganization.
Under United Savings Association v. Timbers of Inwood Forest Assc., 484 U.S. 365 (1988), it is not enough that the property is needed. The debtor must show a reorganization "that is in prospect", real progress toward a confirmable, feasible plan within a reasonable time.
Two sides of the stay motion.
What the statute requires, and the practical factors creditors actually argue.
For cause, including lack of adequate protection of an interest in the property
Debtor has no equity in the collateral. The creditor carries the initial burden; once met, the debtor must prove the rest.
The collateral is not necessary for an effective reorganization that is in prospect (Timbers, 484 U.S. 365).
The debtor must show real progress toward filing, and a reasonable chance of confirming a feasible plan within a reasonable time.
Cleaning up the balance sheet before plan day.
Section 522(f)(3)(B) limits how much of a nonpossessory, nonpurchase-money security interest in tools of the trade a debtor can avoid, currently $5,475 per debtor (or $10,950 for a couple). Anything above that survives.
Preference law under § 547(e)(3), particularly around floating liens on after-acquired property like cattle bought or crops planted within 90 days of filing, can quietly reshape who gets paid and how much.
Where small details change the outcome.
Tools of the trade — § 522(f)(3)(B)
A debtor cannot avoid the fixing of a nonpossessory, nonpurchase-money security interest in implements or tools of the trade above $5,475. Couples filing jointly can avoid up to $10,950. Anything above the cap stays.
Preferences & floating liens — § 547(e)(3)
Floating liens on after-acquired property raise their own issues. Example: a debtor buys cattle or plants crops within 90 days of filing. Whether the secured creditor's lien attaches in time can change who gets paid.
The plan starts on day one.
Every motion, every projection, every valuation feeds into the eventual plan. The stronger that foundation, the more confirmable the plan, and the easier the path through court.
Realistic, defensible projections are the backbone of the plan. They drive both feasibility and what the debtor can actually pay.
Creditors must do at least as well under the plan as they would in a hypothetical Chapter 7. The liquidation analysis proves it.
Each asset is identified and valued. This drives secured-claim treatment, exemption analysis, and the liquidation comparison.
Plan-preparation software pulls projections, valuations, and claim treatments together to compute the actual monthly payment.
Crops, cattle, and seasonal cash flow.
Reorganization issues that look routine on paper, cash collateral, floating liens, after-acquired property, can be decisive for a Chapter 12 family farmer. Seasonal income, weather risk, and input timing all show up in the projections.
- Crop yield assumptions and market price ranges
- Timing of input purchases and harvest proceeds
- Insurance on equipment, livestock, and stored crop
- Floating liens on after-acquired livestock or grain
Questions we hear from reorganization clients.
Real reorganizations. Real outcomes.
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"Mr. Max and his assistant Tami were very helpful, knowledgeable and friendly. Before I started my case I reached out to other lawyers — none of them gave me the information I needed to make the right decision. Tarbox Law gave me the time, listened to my concerns, and made the process easy. They took a huge weight off my shoulders. Thank you so very much, Mr. Max and Tami."
"Dear Mr. Tarbox and staff — thank you for your help and support during this difficult time in my life. I truly appreciate the generosity of time you and your staff gave to my case. I am humble and grateful. Lord bless you and your staff mightily!"
"Max is a great attorney. Very personable and truly cares about your case. You can't go wrong hiring Max to represent you in your bankruptcy case. He has a great staff also."
"The respect and wonderful service I received here is why I will be referring people to them in the future! To Mr. Tarbox, Ms. Pagendarm and their amazing staff — thank you so much!"
"Great lawyer and man. Very concerned about your legal problem and goes the extra mile to help! If you need help on a bankruptcy you can't go wrong here!"
"Really fast paced. They get stuff done fast, and the price was pretty reasonable as well — not too high."
The law often changes and each case is different. The information above is general and not a substitute for legal advice.
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