363 Use Sale or lease of property
1. 363(c)(1)—TIB or DIP can continue to run the business in the ordinary course.
2. 363(c)(2)—Can’t use, sell or lease cash collateral, unless each entity w/ an interest in such collateral consents, or if the court approves.
a. §363(a) defines cash collateral. Basically, if cash comes from selling inventory and the inventory is subject to a valid SI, then the cash be subject to an SI. Also, may just have an SI in cash or cash equivalents.
b. If you want to use such prop, you have to go to court—not every time though. Just need to provide adequate protection for such pro under 363(e). According to Earth Lite, it isn’t good enough to just have an equity cushion for adequate protection—you need something more.
3. Set-off—Important to figure out if creditor holds cash that is subject to setoff b/c the amount held will be treated as a secured claim. Thus, it will be cash collateral under 363(a), and debtor will have to go to court b/4 using it.
a. 506(a)—An allowed claim of a creditor…that is subject to setoff under §553 of this title, is a secured claim… So, if creditor has right to set-off, then that amount will be treated as a secured claim.
b. §553—B/r won’t affect a state law right to set-off, unless the debt owed to the debtor falls under one of the listed categories. These include:
(i) 553(a)(1)—the claim is disallowed.
(ii) 553(a)(2)—such claim was transferred by an entity other than the debtor, to such creditor (A) after commencement of the case or (B) (i) after 90 days before the filing of the pet or (ii) while the debtor was insolvent.
(iii) 553(a)(3)—the debt owed to the debtor was incurred by such creditor (A) after 90 days before the date of the filing of the pet; (B) while the debtor was insolvent; and (C) for the purpose of obtaining a right of setoff against the debtor. (Note that if part of money in an account was deposited for purpose of obtaining right of set-off then only that part cannot be set-off and will not be treated as a secured claim/cash collateral).
(iv) 553(c)—presumption of insolvency for 90 days before b/r.
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