3rd Circ. Says Ch. 11 Collateral Value Can't Be Hypothetical

Law360, New York (May 15, 2012, 3:45 PM EDT) -- When valuing a Chapter 11 debtor’s collateral to determine the amount of a creditor’s secured claim, a bankruptcy court should be guided by the collateral’s fair market value as opposed to hypothetical projections, the Third Circuit said Monday in a precedential decision.

A three-judge panel resolved an issue at the heart of section 506(a) of the federal bankruptcy code. The section, which states that a creditor has a secured claim only if the debtor’s collateral has sufficient value, does not address how to determine such value,...
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