Table of Contents

• Jurisdiction: United States

Table of Contents

Chapter 1: Allowance and Amount of the Secured Claim.......1

A. Introduction and Overview of § 506.................................................................2

B. Amount of Secured Claim...................................................................................4

C. Function of § 506(a): To Determine Secured Creditor Status........................5

D. Bifurcation under § 506.......................................................................................6

E. What Is a Secured Claim? Types of Secured Claims.......................................6

F. Post-Petition Perfection Issues............................................................................8

G. Allowance of a Secured Claim...........................................................................9

H. Should a Secured Creditor File a Proof of Claim?........................................11

I. Valuation............................................................................................................... 12

J. Interest in Property ............................................................................................. 14

K. Limitations on Bifurcation................................................................................ 15

1. Bifurcation in Chapter 7...........................................................................................16

2. Bifurcation in Chapter 13.........................................................................................16

3. Chapter 11 and the Availability of a § 1111(b) Election.......................................17

L. Section 506(b): Equity Cushions and Secured

Creditor Rights Thereto....................................................................................17

M. Allowance of Post-Petition Interest................................................................ 19

N. Allowance of Reasonable Fees, Costs or Charges Provided

Under Loan Agreement or State Law.............................................................21

O. Issues with Allowance of Prepayment

Premiums/Yield Maintenance/Make-Whole Provisions............................ 21

P. Avoidance of Lien Because It Is Not an Allowed Claim...............................23

Chapter 2: Valuation of Collateral...............................................25

A. Valuation Considerations ................................................................................. 27

B. Valuation Basics.................................................................................................30

1. Standard of Value ..................................................................................................... 31

2. Premise of Value ....................................................................................................... 32

3. Common Valuation Methodologies ....................................................................... 34

C. Proof of Value: Presentation of Valuation Evidence ..................................... 39

1. Selection of the Appropriate Valuation Witness .................................................. 39

D. Expert Opinion .................................................................................................. 42

1. Fed. R. Evid. 702: Evaluating the Expert's Qualifications..................................42

2. Relevance and Reliability ........................................................................................ 46

3. Qualifying the Witness as an Expert ...................................................................... 47

4. Challenging the Expert ............................................................................................ 49

E. Burden of Proof .................................................................................................. 51

Chapter 3: Preserving and Protecting Collateral and Its Proceeds...........................................................53

A. Collateral Rights as Property Interests Protected Under the Constitution ..................................................................................... 54

B. Pre-Petition Collateral Review: Contemplating a Potential Bankruptcy Filing ............................................................................. 56

1. Initial Review...