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In Re Timbers of Inwood Forest Associates, Ltd., Debtor. United Savings Association of Texas, Movant-Appellee Cross-Appellant v. Timbers of Inwood Forest Associates, Ltd., Cross-Appellee
Citations: 793 F.2d 1380; 15 Collier Bankr. Cas. 2d 509; 1986 U.S. App. LEXIS 27294; 14 Bankr. Ct. Dec. (CRR) 1029Docket: 85-2678
Court: Court of Appeals for the Fifth Circuit; July 9, 1986; Federal Appellate Court
In the case of In re Timbers of Inwood Forest Associates, Ltd., the Fifth Circuit addressed the rights of undersecured creditors regarding interest payments during bankruptcy proceedings. The court clarified that while oversecured creditors are entitled to receive interest on their debts during these proceedings, undersecured and unsecured creditors are not. The court examined differing interpretations from other circuits: the Ninth and Fourth Circuits allow periodic interest payments to undersecured creditors as a matter of law, while the Eighth Circuit permits such payments based on circumstances. Ultimately, the Fifth Circuit concluded that Congress did not intend to fundamentally alter the existing adequate protection rules established prior to 1978 regarding interest accrual and payments during bankruptcy. The court expressed concerns that allowing periodic interest payments to undersecured creditors could disrupt the distribution process of a debtor's estate, unfairly advantage certain creditors, and undermine the shared risk among all creditors in reorganization. The court found no explicit language in the bankruptcy statute or its legislative history to support the notion that undersecured creditors should receive such payments, affirming that they are not entitled to periodic postpetition interest payments on the value of their collateral. Debtor Timbers of Inwood Forest Associates, Ltd. appeals a United States District Court order that upheld a Bankruptcy Court decision requiring Timbers to make payments to United Savings Association of Texas. These payments represent "opportunity costs," which United claims reflect potential earnings from foreclosing on its secured claim, selling the collateral, and reinvesting the proceeds. United cross-appeals, challenging the Bankruptcy Court's formula for calculating these payments. Timbers, a limited partnership, owns a 188-unit apartment complex in Houston and executed a ten-year note for $4.1 million in June 1982, secured by a deed of trust on the property. Timbers has not made payments since August 1984, prompting United to initiate foreclosure proceedings. However, Timbers filed for Chapter 11 bankruptcy on March 4, 1985, which stayed the foreclosure. An agreed order was established requiring Timbers to pay United the net income from the apartments. United sought relief from the automatic stay, arguing that Timbers failed to provide adequate protection of its security interest. During the evidentiary hearing, it was revealed that the principal balance of the note was $3,929,319.28, with unpaid interest of $437,069.49, totaling $4,366,388.77. Expert valuations placed the property's market value between $3,614,000 and $4,250,000, with a liquidation value of $2,650,000. Both experts acknowledged potential property appreciation, but United remained undersecured, with no evidence presented regarding the likelihood of successful reorganization. United contended that without the stay, it could foreclose and reinvest the proceeds, asserting that Timbers had not provided adequate protection for its interest. The Bankruptcy Court largely sided with United, ordering monthly payments of $50,456, which included $7,956 for escrow and $42,500 for lost opportunity costs, based on a foreclosure value of $4,250,000 and a 12% interest rate. The court stated that these payments could come from rental receipts, without limiting Timbers' obligation to net rental income. This ruling was influenced by precedent from the Ninth Circuit's decision in American Mariner. The District Court affirmed the Bankruptcy Court's decision. Many commentators and courts regard the issue at hand as one rooted in policy and economics, with one perspective arguing that not awarding postpetition interest may hinder secured credit availability for businesses, while another highlights the negative impact of such payments on the potential for reorganizations. The crux of the debate centers not on what the Bankruptcy Code mandates, but rather on what it ought to mandate. As judges, the focus must be on congressional intent as articulated in the Bankruptcy Code, rather than abstract policy considerations. The pivotal question is whether "adequate protection" under § 362(d)(1) implies that an undersecured creditor is entitled to postpetition interest, either in cash or other forms, to offset "lost opportunity" due to the temporary suspension of foreclosure rights by the automatic stay. Judicial interpretation of statutes is distinct from legislative functions; courts must not engage in "judicial legislation" by altering statutory meanings based on perceived improvements. The foundational approach to statutory interpretation begins with the plain meaning rule, where the statute's language should be the primary source for understanding its intent. Each section of a statute must be interpreted in conjunction with others to create a coherent whole. The analysis will first address how claims are calculated at the conclusion of bankruptcy proceedings, particularly regarding interest accrued during that time (Secs. 502, 506), and then explore the requirements for providing adequate protection to secured creditors during the proceedings (Secs. 361-362(d)(1)), which may necessitate pre-conclusion payments from the estate. A creditor may file a proof of claim against a debtor's estate after a bankruptcy petition is filed, which is deemed "allowed" if unobjected or approved by the court. An allowed claim secured by a lien is categorized as an "allowed secured claim" to the extent of the value of the collateral; any deficiency is treated as an unsecured claim. The valuation of collateral considers its intended use and disposition. Creditors with allowed secured claims can receive either the collateral or its value up to their claim amount upon case termination or earlier court approval. Unsecured claims may be satisfied from unencumbered estate assets according to a priority schedule. Generally, creditors cannot claim interest on debts during bankruptcy proceedings, a principle rooted in equity that has been established since the 18th century. This rule prevents penalizing debtors whose ability to pay is legally suspended, ensuring equitable treatment among creditors. Postpetition interest accrual for one creditor would be inequitable to others, supporting the rationale that all creditors should be treated equally as of the insolvency date. The Court's decisions in Sexton and New York v. Saper establish that creditors should not be disadvantaged by delays in bankruptcy proceedings. The principle underlying these cases highlights the inequity of allowing interest on certain debts to accumulate during bankruptcy, potentially exhausting limited estate assets before paying the principal owed. An oversecured creditor may claim postpetition interest if the total of the principal and accrued interest does not exceed the collateral's value. Additionally, both secured and unsecured creditors may receive postpetition interest if the debtor's estate turns out to be solvent, allowing for full payment of claims, including interest. Historically, rules against postpetition interest arose when bankruptcy laws focused solely on liquidation without reorganization provisions. As laws evolved to include reorganizations, these rules were adapted to apply under Chapter XI and Chapter X proceedings. The Bankruptcy Code maintains these principles, explicitly forbidding claims for unmatured interest at the petition's filing date and continuing to differentiate between oversecured and undersecured creditors regarding postpetition interest claims. Overall, the Code and its interpretations uphold an equitable approach that prevents the misuse of unencumbered assets to favor one class of creditors over another, while allowing oversecured creditors to collect interest from their collateralized assets without violating this principle. Upon filing a bankruptcy petition, Section 362(a) of the Bankruptcy Code imposes an automatic stay, preventing creditors from collecting claims or foreclosing on the debtor's property. The stay aims to allow the debtor time to negotiate a reorganization plan and to prevent creditors from gaining an unfair advantage. Under Section 362(d), creditors can seek relief from this stay if they can demonstrate (1) a lack of "adequate protection" for their interests or (2) if the debtor has no equity in the property, which is not essential for reorganization. In such cases, the debtor bears the burden of proving adequate protection, except regarding the debtor's equity in the property. Section 361 outlines three methods of providing adequate protection: (1) cash payments to compensate for any decrease in the value of the creditor's interest, (2) granting a lien on unencumbered property, and (3) allowing the court to provide other forms of relief that ensure the creditor realizes the "indubitable equivalent" of their interest. However, Section 361(3) does not permit administrative priority claims as a form of adequate protection, although such claims may automatically arise if the protection proves insufficient. The critical issue is whether Section 361(3) was intended to allow periodic payments of postpetition interest to undersecured creditors when they would not have a claim for such interest at the end of the proceeding. The origin of "indubitable equivalent," as articulated in a historical case, suggests that this section may extend beyond mere protection against value decline and could imply a requirement for postpetition interest payments. The court observed that post-confirmation claims typically involve paying creditors post-confirmation interest. The term "indubitable equivalent" in Section 361 suggests that Congress may have integrated the standard for confirming a reorganization plan over dissenting secured creditors into the adequate protection provisions, which requires safeguarding the present value of a secured claim during the stay. However, using this phrase to justify postpetition interest payments raises questions, as "indubitable equivalent" refers to a substitute for an interest rather than defining it. Sections (1) and (2) protect against the decline in collateral value due to the debtor's actions during the stay, while subsection (3) does not specify what interest is protected. It is possible that subsection (3) simply offers alternative means of providing adequate protection without expanding the substantive interests protected. The provisions aim to shield secured creditors from decreases in collateral value during the stay, with little basis in the statute for requiring periodic postpetition interest payments to undersecured creditors, especially since the Code clearly states that they are not entitled to such claims at the end of proceedings. The ambiguous nature of Section 361, particularly regarding interest, suggests a need to explore legislative history for clarity on the intention behind "adequate protection," especially considering that Congress aimed to codify existing common law and judicial interpretations at the time of the Code's enactment in 1978. The normal statutory construction rule emphasizes that changes to judicial concepts should be explicitly stated, a principle that is especially relevant in bankruptcy law. Committee hearings and accompanying reports from the House and Senate provide insights into congressional intent concerning the automatic stay provisions in Sections 361 and 362 of the proposed Code. Historically, the Supreme Court has recognized the bankruptcy court's equitable power to restrain creditors from enforcing liens post-bankruptcy petition since 1845. While the Code codified adequate protection for secured creditors, courts had already deemed it a key consideration before its formal inclusion. The Supreme Court addressed secured creditors' rights, particularly during plan confirmations, reinforcing principles applicable during initial stays and outlining the court's equitable powers. The Fifth Amendment mandates that a creditor's secured position value be preserved during a stay, leading courts to establish four factors for deciding whether to vacate a stay: (1) potential material harm to the secured creditor, (2) likelihood of debtor reorganization, (3) necessity of the property for the debtor’s rehabilitation, and (4) equity in the property that could benefit the debtor or creditors. Courts emphasized judicial flexibility and equitable considerations when weighing these factors, with emphasis varying based on the chapter governing the proceeding. In corporate reorganizations under Chapter X, stays were typically vacated if continuation posed material harm to secured creditors, although maintaining lien value during the stay was crucial. In cases involving depreciating collateral, creditors might require compensation for depreciation, although some rulings, like in *In re Yale Express System, Inc.*, indicated a more nuanced approach to consider the impact of property use during reorganization. The secured creditor is entitled only to an administrative priority for depreciation, with Yale Express erroneously assuming full payments for administrative expenses. In In re Bermec Corp., the court shifted away from Yale Express by mandating periodic cash payments to secured creditors for the economic depreciation of collateral, thus avoiding the risks of an administrative priority. Under Chapter XI petitions, which propose arrangements for unsecured debt settlement, the court could enact a stay "for cause shown," but stronger justification was needed to maintain a stay against lienors compared to Chapter X proceedings. Additionally, Chapter XII addressed real property arrangements and allowed creditors to seek stay relief "for cause shown." Criticism of pre-Code stay provisions highlighted that while the automatic stay aimed to protect the bankrupt estate, it balanced interests among debtors, unsecured creditors, and secured creditors' rights to foreclose. Requests for stay relief were prioritized in bankruptcy courts, but practical challenges often delayed such proceedings. The complexities of adversary proceedings for relief requests further complicated timely action, leading to inefficiencies in bankruptcy administration. In response to calls for reform, Congress created the Commission on Bankruptcy Laws of the United States in 1970 to evaluate and propose changes to the bankruptcy framework. After two years of research, the Commission presented a report proposing amendments to bankruptcy laws, specifically targeting administrative deficiencies in the Act. The draft legislation aimed to codify common law standards to protect secured creditors during the automatic stay period. It referenced cases like *In re Yale Express System, Inc.* and *In re Bermec* while clarifying that the adequacy of protection would be determined case-by-case, with liquidation value of collateral at the petition date serving as a benchmark. The proposal included conditions for courts to impose, such as requiring equivalent security or additional security if collateral value is expected to decrease. The Commission's objective was to allow property use while ensuring secured creditors are compensated for any decline in value. The suggested standards did not permit periodic interest payments for delays in foreclosure. The draft legislation was introduced in 1973-1975, followed by extensive Congressional hearings in 1975 and 1976, where many witnesses, including those representing secured creditors, supported the core provisions. However, concerns were raised regarding delays in reorganization proceedings and the potential depletion of collateral, particularly "soft" collateral, with calls for a more expedited and flexible reorganization process. Several concerns were raised regarding the Commission proposal's ability to protect creditors from declines in the value of "soft" or "self-liquidating" collateral, including cash and inventory. While some witnesses supported codifying the common law standard for protecting secured creditors against depreciation during the stay, they called for more detailed examples from the Commission's comments to be incorporated into the legislation. Notably, during extensive hearings, no witness mentioned the need for periodic postpetition interest payments for undersecured creditors, suggesting that Congress did not intend for adequate protection provisions to require such payments. Following committee hearings, the Commission's proposals were revised and reintroduced, leading to the Bankruptcy Reform Act of 1978. Legislative history should be analyzed carefully, starting with the most recent authority and moving backward. The proposed Section 362(d) indicated that the automatic stay could be lifted for causes such as inadequate protection of a creditor's property interest. The House Report clarified that both equitable and legal interests are protected, and Section 361 was designed to illustrate how adequate protection could be provided. The concept of adequate protection is rooted in Fifth Amendment property rights but is influenced by policy considerations, ensuring that secured creditors retain the value of their bargain. The section acknowledges that while creditors may not always receive their exact bargain, they should receive equivalent value. Additionally, the Report outlined four examples of methods for providing adequate protection, emphasizing that these methods are neither exclusive nor exhaustive. The codification of examples in the proposed legal framework aimed to address concerns from secured creditors regarding excessive discretion given to bankruptcy judges. Proposed Section 361(1) was designed to allow periodic cash payments to compensate for a decrease in the value of the creditor’s interest in property, referencing protections established in previous cases like In re Yale Express and In re Bermec. Proposed Section 361(2) sought to provide additional or replacement liens on other properties to guard against value decline. Proposed Section 361(3) aimed to afford administrative expense priority to the protected entity corresponding to their loss, contingent upon the certainty of full payment of administrative expenses in liquidation scenarios. Proposed Section 361(4) served as a catch-all, enabling courts to grant other forms of relief to ensure the realization of value for the protected entity, including potential guarantees from third parties. The report underscored that these methods depend on the value of the secured creditor's interest, yet it did not delineate how or when this value should be assessed, leaving it to case-by-case interpretation. The House Report emphasized that secured creditors should not be deprived of their negotiated benefits, which likely pertained to receiving collateral or its value upon default. Thus, while a stay may temporarily hinder this process, creditors should be compensated for any depreciation in collateral value during the stay. Meanwhile, the Senate considered similar legislation, with some variations in the language of proposed Sections 361 and 362(d), particularly regarding the conditions under which relief from the automatic stay could be sought. The Senate version of Sec. 361 in the proposal S.2266 significantly diverged from the House version H.R. 8200 by excluding the third and fourth subsections present in the House's Sec. 361. It outlined two primary methods of providing adequate protection for secured creditors: (1) periodic cash payments to compensate for depreciation, following the precedent set in In re Bermec, and (2) an additional or replacement lien on other debtor property to cover declines in value or actual consumption of the collateral during the case. The Senate Report emphasized that protection should focus on the collateral's value rather than the specific rights to collateral, aligning with the views expressed in Wright v. Union Central Life Ins. Co. Notably, the Senate version did not include a catch-all provision, suggesting it solely aimed to protect against declines in value. Additionally, it rejected the idea of granting administrative priority as a means of providing adequate protection, deeming it too uncertain, which favored secured creditors by mitigating risks associated with potential declines in collateral value amid uncertain administrative expenses. The proposed Sec. 362(d) further supported secured creditors by imposing a thirty-day limit for court actions on motions for relief from the stay. On September 7, 1978, the Senate passed its version to substitute the House's, prompting negotiations between the House and Senate Judiciary Committees to reconcile their differences, particularly regarding bankruptcy court status. No conference committee was formed, but on September 28, 1978, the House adopted a negotiated compromise that became the new Code. This compromise amended Sec. 362(d) and made significant alterations to Sec. 361, including the removal of the House's administrative priority protection method and substituting "indubitable equivalent" for "value." Section 361(4) of the House version of H.R. 8200 allows for relief to secured creditors in forms other than periodic cash payments or a replacement lien, specifically aiming to ensure the realization of the indubitable equivalent of the creditor's interest in property. This provision represents a compromise between the House and Senate regarding "adequate protection" for secured parties. The House amendment removes a prior provision that would have granted secured parties an administrative expense for any decrease in collateral value, raising concerns about the estate's ability to cover such expenses. The modified Section 361(4) indicates that courts can grant other adequate protections without establishing an administrative priority, designed to safeguard a creditor's allowed secured claim. If such protection proves inadequate, creditors may receive a first priority administrative expense claim under Section 507(b). In cases where a creditor elects under Section 1111(b)(2), the adequate protection pertains to the value of the collateral rather than the inflated secured claim. Statements by Rep. Edwards and Rep. Butler clarify that adequate protection is required when there is concern over property misuse or depreciation, but if property is not misused, secured creditors are not entitled to adequate protection payments. The determination of an "allowed secured claim" excludes unmatured interest and is based on the collateral's value, aligning with the intent of Sections 361-362 of the Bankruptcy Code. Rep. Edwards' remarks indicate that Section 361 primarily aims to protect a creditor’s allowed secured claim, specifically the value of collateral. It is improbable that Section 361(3) mandates periodic postpetition interest payments, as the allowed secured claim does not encompass postpetition interest. The legislative development of Sections 361-362 supports this interpretation, particularly through House-Senate compromises. A proposed House provision for administrative expense priority due to collateral value decline was eliminated due to concerns about the estate’s ability to pay administrative expenses fully. Additionally, the conferees agreed to modify the language in a general catch-all provision to require protection of the "indubitable equivalent" of a creditor's interest rather than merely its "value." This change, though unexplained, likely reflects Senate reluctance to adopt the House's broader protections, which could expose creditors to greater risks. The final compromise ensured that if less risky options like cash payments or replacement liens were not ordered, other forms of relief would guarantee creditors the equivalent value of any lost property due to collateral use during the stay. Despite the adoption of the "indubitable equivalent" phrase, the legislative history does not suggest that the Senate intended to alter the established protections for secured creditors or to incorporate cram-down standards into the adequate protection provisions during the stay. Throughout the legislative process, there was no explicit criticism or rejection of the principle that only depreciation of collateral needed protection, indicating that Section 361 is essentially a codification of existing case law concerning adequate protection under prior automatic stay rules. Kennedy, Automatic Stay II, references the In re Yale Express rule, which prohibits periodic postpetition interest payments to undersecured creditors unless explicitly stated by Congress. The excerpt emphasizes that for any change in this rule, Congress would have clearly articulated its intentions rather than leaving them to inference from legislative history. It cites Midlantic National Bank, reinforcing the need for clarity in statutory language. The discussion shifts to the cram-down provisions under Section 1129 of the Bankruptcy Code, highlighting Judge Learned Hand's ruling in In re Murel Holding Co. that dissenting secured creditors are entitled to the present value of their secured claims, typically compensated through interest payments. Congress codified this principle in 1978, mandating that a secured creditor must receive deferred cash payments equaling the allowed amount of their claim as of the plan's effective date. The text notes that, unlike the explicit requirements in the cram-down provisions, similar language regarding interest payments for delayed repayment is absent in the automatic stay provisions under Sections 362(d)(1) and 361. This omission indicates Congress's intentional exclusion of interest payments for undersecured creditors during reorganization proceedings. The conclusion drawn is that Section 361(3) does not authorize such payments, contrasting with the interpretation of some courts that follow the American Mariner approach, which has raised unresolved questions due to the lack of guidance from the Code. The statute lacks explicit support for interest payments, with the term "indubitable equivalent" not referencing "interest." Courts often avoid discussing interest due to Sections 502 and 506, which prevent undersecured creditors from receiving postpetition interest as part of their claims. Instead, they focus on compensating for "lost opportunity" costs under adequate protection provisions. These costs represent potential earnings an undersecured creditor could have gained if allowed to foreclose on collateral and reinvest proceeds, which is hindered by the stay. Courts face challenges in determining how to calculate these lost opportunity costs, including when to start compensation (e.g., petition date, motion date, or ruling date), how to factor in delays from state foreclosure processes, which interest rates to apply to hypothetically reinvested proceeds, and whether to apply payments to the principal debt. Responses have varied, with one bankruptcy court deciding that postpetition interest payments should commence six months after the petition due to anticipated delays in foreclosure and sale. This is supported by the American Mariner case, which emphasizes accounting for repossession and sale time. Conversely, in Grundy National Bank, the Fourth Circuit ruled that interest should begin only upon filing a motion for relief from the stay and should consider the time needed for repossession and sale. The bankruptcy court in the current case failed to consider that the bankruptcy petition was filed shortly before foreclosure, meaning part of the six-month period had already elapsed. The court recognized a flaw in its ruling, as the creditor would face another six-month delay if the stay lifted, resulting in inadequate compensation for lost opportunities. Ultimately, the court acknowledged the rule as flawed but deemed it "reasonable." Delay in commencing adequate protection interest payments is aligned with the Congressional goal of promoting reorganization under Chapter 11. Courts have recognized that initiating these payments immediately after the imposition of a stay could hinder the reorganization process by incurring opportunity costs. This has led to various interpretations of the creditor's right to postpetition interest, suggesting that courts modify these rights to balance competing requirements of the Bankruptcy Code. The courts face challenges in determining an appropriate interest rate for hypothetically reinvested proceeds, with some establishing rates at the lower of market or contract rates, despite the inconsistency this creates with the intent of Section 361 to protect opportunity costs fully. Discrepancies in interest rates awarded—such as an 18% rate in one case versus a 12% rate in another—indicate a lack of clarity regarding the duration of investments, with courts potentially needing to consider the creditor's typical investment practices and market conditions, although the Bankruptcy Code provides no specific guidance. Moreover, the treatment of "opportunity cost payments" in successful reorganizations remains ambiguous, as courts have expressed uncertainty about their relationship to contract interest. The concept of "American Mariner interest" is identified as separate from contract interest, further complicating the issue. If a debtor cures past defaults under Section 1124(2), courts may need to establish refund procedures for any awarded opportunity cost payments. A creditor deemed "unimpaired" under Section 1124(2) cannot vote on a debtor's reorganization plan. If a debtor has made postpetition interest payments at a market rate exceeding the contract rate, they may be entitled to a refund upon reinstating the original loan terms; however, the Bankruptcy Code lacks a specific refund provision for this scenario. The administrative challenges and the necessity for a new procedure indicate that Congress did not intend for opportunity costs to serve as adequate protection under Section 1124(2). In *In re Victory Construction Co.*, the court addressed the treatment of payments made by a debtor who had cured defaults and confirmed a plan. The debtor had made interim "adequate protection payments" at a market rate of 18%, despite the original contract rate of 8%. While it was initially assumed that the debtor should benefit from any excess payments made, the court concluded that these payments were not strictly contractual compensation. The creditor retained the higher interest payments as they had temporarily adjusted the loan terms due to the reorganization. The ruling effectively altered the creditor's investment terms, despite bankruptcy laws not intending to modify creditor agreements for their benefit. Additionally, the American Mariner cases emphasize the delays in the reorganization process, which impose financial losses on all creditors. Although postpetition interest is not a constitutional requirement, some courts award it to undersecured creditors out of fairness, recognizing that they should not suffer unreasonably during delays. This concern for delay was a significant factor in Congress's revisions to adequate protection and reorganization laws in 1978. Witnesses reported significant delays in bankruptcy proceedings due to cumbersome procedures under the Act and inadequate court attention to motions for relief from the stay. In response, Congress enacted numerous provisions in the Code aimed at expediting reorganization processes. Key sections include: - **Sec. 305(a)**: Allows dismissal or suspension of proceedings if it benefits creditors and the debtor, particularly when alternative arrangements are in progress. - **Sec. 1102(b)(1)**: Permits the continuation of prepetition creditors' committees. - **Sec. 1126(b)**: Streamlines procedures for accepting plans, especially for prepetition solicitations. - **Sec. 1121(b)**: Limits the debtor's exclusive right to file a plan to 120 days, extendable only "for cause," with courts having authority to reduce this period. - **Sec. 1121(c)**: Allows creditors to file plans after the initial 120-day period. - **Sec. 1112**: Enables creditors to move to dismiss petitions or convert proceedings to Chapter 7 if the debtor is uncooperative. - **Sec. 1104(a)**: Allows creditors to seek the appointment of a trustee. Most notably, Congress prioritized motions for relief from the stay, mandating that if a court fails to act within thirty days, the stay automatically lifts. This 30-day rule was intended to address delays effectively. The process for seeking relief has shifted from adversary proceedings—which often involved complex counterclaims—to a simpler motions procedure focused solely on creditor claims and the adequacy of protection. Legislative history indicates that these changes were designed to ensure timely consideration of relief requests and to provide creditors with various tools to mitigate delays in reorganization. Acceptance of the American Mariner position may allow undersecured creditors to receive periodic postpetition interest payments at potentially higher rates than the contract rate, without these payments being credited against principal. This could lead to delays in reorganization proceedings, contradicting Congress's intent to expedite such processes. Undersecured creditors, particularly those with little hope of recovering from the unsecured portion of their claims, may lack incentive to cooperate in forming a negotiated plan, as they could benefit from prolonged proceedings. Such delays could adversely impact unsecured creditors by depleting unencumbered assets that would otherwise be available for distribution to them. A bankruptcy court may choose to continue a case with poor prospects for success rather than terminate it, opting instead to appease undersecured creditors with postpetition interest payments. However, this choice leads to increased costs, including both interest and administrative expenses, which are typically borne by unsecured creditors. This decision for delay does not align with Congress's objective to minimize such delays in bankruptcy proceedings. Furthermore, awarding periodic postpetition interest to undersecured creditors seems inconsistent with the procedural frameworks established in Sections 506(b) and 506(c) of the Bankruptcy Code. Under Section 506(c), a debtor may recover reasonable costs from the property securing a creditor's allowed claim. If this recovery results in the creditor being oversecured, they are entitled to interest at the contract rate on their net allowed secured claim, with interest payable only at the end of the proceeding. In contrast, an undersecured creditor, under the American Mariner interpretation, is eligible for periodic interest payments potentially at market rates without deductions for the unrecoverable costs until the case concludes. This could result in undersecured creditors being in a more advantageous position compared to oversecured creditors, which raises concerns about the consistency of such outcomes with the overall policies of the Bankruptcy Code. Periodic postpetition interest payments to undersecured creditors can significantly impact the distribution of a debtor's estate during liquidation or reorganization, leading to a reallocation of unencumbered assets and shifting the risk of reorganization failure. In many secured financing arrangements, scheduled principal payments align with collateral depreciation, necessitating adequate protection payments under Sections 361(1) and (2) to address value decline. If Section 361(3) is interpreted to require postpetition interest, total adequate protection payments might equal the principal and interest obligations of existing secured debt, as only unsecured debt interest would stop accruing. Debtors unlikely to afford these payments may face immediate Chapter 7 conversion, contrary to congressional intentions supporting reorganization efforts. Undersecured creditors must file for adequate protection under Section 362 soon after the bankruptcy petition to avoid losing interest, prompting a surge in demands for payments that mirror prepetition obligations. The automatic stay, a critical debtor protection, halts creditor actions, allowing the debtor to restructure without the pressure of aggressive collection efforts. This mechanism is designed to ensure equal treatment among creditors, preventing a competitive rush for the debtor’s assets. The situation created by undersecured creditors, as highlighted in the American Mariner case, undermines this protective intent and emphasizes the need for transparent information regarding the debtor’s financial status for fair asset distribution. The debtor must file detailed schedules of creditors, assets, liabilities, current income, expenditures, and a financial affairs statement either with the bankruptcy petition or within 15 days, unless an extension is granted. A meeting between the debtor and creditors is mandated 20 to 40 days post-filing, where the debtor is examined under oath. A committee of unsecured creditors, along with potentially other creditor committees, must be established to ensure adequate representation and to assist in investigating the debtor's affairs and developing a reorganization plan. This comprehensive information gathering aims to evaluate the feasibility of a reorganization or the necessity of liquidation. If a reorganization plan is pursued, the Bankruptcy Code outlines specific requirements for creditor participation, including disclosure (Sec. 1125), voting (Sec. 1126), and the best interests of creditors test (Sec. 1129(a)(7)). The absolute priority rule (Sec. 1129(b)(2)(B)) mandates that claims and interests adhere to their strict priorities for a plan to be considered fair and equitable. The court must first ascertain the identity and amounts owed to creditors to facilitate a feasible distribution of the debtor's unencumbered assets according to their respective priorities. The extensive processes for information gathering and creditor representation contrast sharply with the expedited procedures for resolving adequate protection motions, which are characterized by their speed and limited scope. This suggests that Congress intended for the Sec. 362 motion not to be a means of distributing unencumbered estate assets in a manner that would be required for a reorganization plan with deferred payments. Characteristics of a stay relief motion indicate that Congress did not intend for multiple Section 362 motions from secured creditors to decisively impact case outcomes, particularly if debtors are required to make adequate protection payments that approximate total principal and interest on secured debts. Interpreting Section 361(3) to mandate interest payments to undersecured creditors contradicts the Bankruptcy Code's goal of orderly asset distribution following a temporary reprieve for assessing creditor priorities and debtor viability. If Congress had aimed to fundamentally alter the automatic stay's function and asset distribution, it would have made that intention clear. Supreme Court precedents, such as Vanston, suggest that secured creditors should share some risks associated with the rehabilitation process. Prior to the American Mariner interpretation, all creditors absorbed their own delay costs in bankruptcy. The American Mariner decision has shifted these costs from undersecured creditors to unsecured creditors, while oversecured creditors continue to absorb their own interest costs. This reallocation also redistributes the risks of reorganization failure, which Congress would likely have clarified if intended. The Ninth and Fourth Circuits have ruled that the Code requires postpetition interest payments to undersecured creditors by law, a view supported by several bankruptcy courts and commentators. The Eighth Circuit, however, holds that entitlement to postpetition interest may depend on case-specific factors rather than being a legal guarantee. Additionally, many bankruptcy courts and commentators assert that Chapter 11 courts cannot award postpetition interest to undersecured creditors as periodic cash payments for adequate protection under Sections 361-362(d)(1). The American Mariner decision has significantly influenced bankruptcy law, leading to a surge in Section 362(d) motions and shifting critical points in reorganization proceedings to the early weeks post-filing. The analysis of American Mariner reveals several critical issues regarding statutory interpretation and legislative history related to Sections 361-362(d)(1) of the Bankruptcy Code. The court's opinion fails to reference crucial legislative comments from Rep. Edwards and Sen. DeConcini, which clarify that Section 361(3) allows for "other forms of adequate protection" beyond those outlined in Sections 361(1) and (2), and that adequate protection only safeguards a creditor's allowed secured claim without including postpetition interest for undersecured creditors. Additionally, the court overlooked Rep. Butler's statement suggesting that adequate protection payments or relief from the automatic stay are warranted if a creditor fears property misuse or depreciation. The court also neglected to consider relevant interest provisions outlined in the Bankruptcy Code and significant Supreme Court decisions, such as Vanston and Sexton. Although the Bankruptcy Appeals Panel framed the issue around whether undercollateralized secured creditors are entitled to postpetition interest, the Ninth Circuit did not address this directly. The Ninth Circuit's interpretation of the "indubitable equivalent" language in Section 361(3) was heavily influenced by its understanding of the term as utilized in Murel Holding, leading to an assumption that interest payments during the stay were mandated. However, the court's conclusion that early pre-Code cases are largely irrelevant to interpreting Sections 361 and 362 contradicts established statutory construction principles. Moreover, the Ninth Circuit's reliance on the House Report's assertion that creditors should receive the "benefit of their bargain," implies that creditors expect compensation for delays caused by federal law. This assumption is questionable, as it overlooks the fact that creditors' agreements inherently incorporate federal bankruptcy law requirements. Ultimately, the mortgage contract is subject to Congress's constitutional authority to legislate on bankruptcy matters. The contract between the petitioner and respondent implicitly incorporates key legal provisions, notably the automatic stay under Section 362(a) and the interest provisions of Sections 502(b)(2) and 506(b). These provisions fundamentally alter the original agreement between the parties. Specifically, in instances where a creditor is undercollateralized at the time of asset distribution, they are entitled only to their "allowed secured claim" and do not receive any unmatured interest at the bankruptcy filing date. This interpretation challenges the notion of "benefit of the bargain" in claims for postpetition interest, as it disregards the actual understanding of the parties involved and the enforceability limitations cited by borrowers' counsel regarding bankruptcy laws. The Ninth Circuit's interpretation of the legislative compromise that introduced the term "indubitable equivalent" into the Code may have been flawed, failing to reflect the Senate's intent to protect creditors from the risks associated with declining collateral during the stay. Additionally, the American Mariner case exhibits logical inconsistencies, particularly regarding its guidelines for payment determinations, which, while assisting reorganizations, do not align with the protections offered to undersecured creditors under Section 361. The Eighth Circuit's ruling in Briggs, while narrower, similarly faces flaws as it requires the consideration of various factors when determining postpetition interest payments, with only the length of the stay directly related to accruing interest. While Briggs offers flexibility that may prevent premature Chapter 11 case terminations, this flexibility conflicts with the "indubitable equivalent" standard and the complete compensation requirement established in American Mariner. The Eighth Circuit's opinion in Briggs indicates that bankruptcy courts will face significant uncertainty regarding the application of the rule established in this case, necessitating years of litigation to clarify its parameters. Section 361(3) allows courts to provide "other relief" beyond cash payments and replacement liens to secure creditors against value loss of collateral due to a debtor's actions during the automatic stay, contingent upon that relief compensating the creditor for the lost value. However, this section does not mandate regular postpetition interest payments to undersecured creditors for delays in the reorganization process. The district court's directive for Timbers to pay $7,956 monthly for tax and insurance escrow remains unchallenged. Conversely, the order for Timbers to pay $42,500 monthly for "adequate protection of foreclosure rights" is reversed, and the matter is remanded for further proceedings. Some commentators and courts equate "opportunity cost payments" with postpetition interest payments, suggesting these should not be overlooked in relation to the Bankruptcy Code's interest provisions. The notion of opportunity cost payments being equivalent to interest is supported by various case law and commentary, indicating that such payments effectively function as interest for the duration of the automatic stay, allowing undersecured creditors to receive compensation at market rates rather than contract rates. The court in In re Nesmith interprets the decision in American Mariner to affirm that a secured lender's debt includes interest on arrearages when considering a motion for relief from the automatic stay. Although the American Mariner case avoided labeling these payments as interest, it raised the issue of whether an undersecured creditor is entitled to post-petition interest on its collateral's value. Murphy's analysis supports that undersecured creditors have a right to interest on their secured claims. The Bankruptcy Code allows for relief from the stay for cause, such as inadequate protection of a party's property interest. Relevant case law emphasizes the need to interpret statutory provisions in context, rather than in isolation. Under 11 U.S.C. § 1111(b)(2), undersecured creditors may elect to treat their claims solely as secured claims. The petition prevents interest from accruing but does not eliminate the right to it, meaning that interest can continue to accrue for oversecured creditors. Additionally, in cases where collateral generates income, post-petition interest may be allowed, as it prevents the bankruptcy estate from benefiting unduly from delays, aligning interests fairly between creditors and the estate. In bankruptcy administration, simple interest on unsecured claims accrues only up to the bankruptcy date, a principle upheld by most courts for both unsecured and deficiently secured claims. However, interest is allowed on adequately secured claims. Congress codified this prevailing rule, allowing debts to be proved against a bankrupt's estate if they are founded on a fixed liability, with interest recoverable as of the petition filing date, as stated in 11 U.S.C. Sec. 103(a)(1) (1976, repealed 1978). Postpetition interest rules established in 1978 were intended to codify existing law, particularly allowing a creditor with an oversecured claim to receive interest equal to the value exceeding the underlying claim (Sec. 506(b)). In rare instances of solvent estate liquidation, unsecured creditors may receive postpetition interest (Sec. 726(a)(4)(5)). The automatic stay protects creditors by preventing them from pursuing remedies, which is crucial for the trustee's ability to manage the estate. The term "indubitable equivalent" in Sec. 361 suggests that Congress aimed to compensate for delays in foreclosure rights as part of adequate protection, although its interpretation has led to extensive litigation. Adequate protection can be provided through cash payments, additional collateral, or other methods that ensure secured parties receive the equivalent value of their collateral, but courts have debated whether opportunity costs should be included in this protection. The Court examined the interplay between Congress' authority to impact secured creditors' rights and the constraints imposed by the Fifth Amendment. It noted that mortgage contracts inherently recognize Congress' constitutional power to legislate on bankruptcy matters, implying that any purchaser at a foreclosure sale must be aware of the potential application of bankruptcy laws in a manner consistent with the Fifth Amendment. The Court dismissed arguments claiming that Congress lacks power to modify property rights, emphasizing that bankruptcy proceedings frequently alter state-established property rights, including the ability of a bankruptcy court to enjoin the sale of collateral if it would impede reorganization efforts. The Fifth Amendment safeguards a creditor's rights only to the extent of the value of the secured property, meaning undersecured creditors are protected only regarding the collateral's value, not the total claim amount. The Supreme Court's decision in *In re New Haven Inclusion Cases* clarified that while the reorganization process can diminish the value of secured creditors' interests, there is no constitutional barrier to such depreciation, as their rights are not absolute. Furthermore, the court in *Yale Express* denied a secured creditor's demand for rental payments for collateral use, stating that such payments would undermine the reorganization effort. The court maintained a stay on proceedings, recognizing the concerns of manufacturing secured creditors about potential depreciation of their security, but emphasized the need to support corporate reorganization efforts with a reasonable chance of success. The Bankruptcy Rule 11-44(a) established an automatic and ex parte stay upon filing a petition, regardless of the original Act's provisions. In Barth Equipment Co. v. Perlstein, the court dismissed a claim from an undersecured creditor seeking rental payments for equipment during a delay in reclamation, ruling that the creditor's reclamation rights are not absolute and that immediate seizure would preclude rental to third parties. The only recoverable damages would be any decrease in market value of the goods during that period. Additionally, under section 7-203(b), secured parties or lessors can file complaints to either terminate or modify the stay, requiring the trustee or debtor to prove adequate protection of the secured creditor's interest as of the petition date. The legislative history of the Bankruptcy Reform Act reveals insights into congressional intent, with testimonies highlighting the automatic stay's advantages for preserving the going concern value, beneficial to both creditors and debtors. The rehabilitation process in bankruptcy should be expedited to allow debtors and creditors to resolve matters within months instead of years. Concerns were raised that debtors might prolong cases, negatively impacting secured creditors. Modifications to the automatic stay provision are suggested to ensure prompt actions on relief motions. Testimonies highlighted the need for mandatory safeguards for creditors or landlords regarding the use of mortgaged or leased property, proposing compensation or security equivalent to the property's economic decline. Secured creditors should receive periodic payments to cover depreciation and maintain their claim's value during bankruptcy proceedings. Several representatives emphasized the necessity of protecting secured creditors against economic value decline and ensuring that any use of collateral like cash or inventory does not jeopardize their interests. Additionally, there was a discussion on whether specific factors should be enumerated in the statute to guide courts on property use subject to liens, with opinions varying on the necessity of such criteria versus leaving discretion to the courts on a case-by-case basis. Adequate protection under bankruptcy law should incorporate specific alternatives as outlined in the statute. The only relevant mention in the record comes from a law review article by Murphy, which discusses the automatic stay provisions. One suggested condition for maintaining the stay is requiring debtors to make interim cash payments to creditors sufficient to compensate for anticipated losses. This method, used in cases like In re Bermec Corp., has been common in settlements involving secured creditors and various bankruptcy representatives. However, the interim cash payments alternative presents complexities. Secured financing is typically structured such that scheduled payments cover collateral depreciation; thus, if debtors could meet these payments, bankruptcy might not be necessary. Courts face challenges determining the basis for payment amounts, whether liquidation or fair market value, with a preference for erring on the higher side to protect creditors. Excess payments benefit general creditors by increasing the debtor's equity in the collateral. Additionally, if interim cash payments are implemented, secured creditors might also deserve interest or compensation for funding costs, despite traditional views that interest is only warranted if surplus security exists. Under current bankruptcy provisions, secured creditors effectively receive interest when debtors maintain payments according to original terms or renegotiate schedules. Viewing the stay as an involuntary loan to the debtor suggests secured creditors should be shielded from inflation impacts, especially when their creditors do not provide interest moratoriums. Paragraph (4) of the statute clarifies the concept of adequate protection, stating that it should lead to value realization without prescribing specific methods. Contemporary commentary implies this subsection allows for various means of ensuring adequate protection against declines in collateral value. Adequate protection under the Act is mandated when there is a decrease in the value of a secured party's interest. The House bill addressed secured creditors' concerns regarding the definition of "value" for Sec. 361 determinations, opting against the exclusive use of "liquidation value" as recommended by the Commission, while also not adopting the creditors' preference for "fully going concern value." Instead, the bill left "value" undefined, indicating that its determination should rely on equitable considerations specific to each case. This lack of clarity has led some commentators to express confusion about the measure of "realization of value." The Senate bill reflected apprehensions that alternative methods of protecting against economic depreciation, apart from periodic cash payments or replacement liens, could escalate risks for secured creditors. A House-Senate conference on the matter was deemed unlikely to succeed, as the necessary compromises were beyond the differences in the House and Senate versions. The report from the conference committee is crucial for understanding congressional intent, as it represents the final agreed terms by both houses, making it a strong indicator of legislative purpose. Furthermore, both House and Senate committee reports emphasize that unmatured interest must be disallowed at the petition filing date. Adequate protection pertains to a secured creditor's allowed claim, which is defined by the value of the property securing the creditor's notes. The determination of whether a creditor's interest is adequately protected begins with assessing the value of the secured interest, which encompasses the debt and any customary interest or expenses. The creditor's right to adequate protection is constrained to the lesser value between the collateral and the secured claim amount. Lastly, while amendments to the statute can assist in interpretation, changes made within a committee without explanation may not reliably reflect congressional intent. The Court's reasoning in Trailmobile Co. v. Whirls emphasizes that the interpretation of statutes should not rely on ambiguous legislative actions. In Watt v. Alaska, the Court analyzed a statutory amendment that lacked clarification, concluding that Congress's silence suggested an intent not to significantly change existing law. It is improbable that Congress would enact substantial alterations without comment. A commentator asserted that Congress's rejection of a proposal in In re Yale Express indicated a choice to avoid imposing reorganization risks on secured creditors, though this inference may overstate Congress's intent regarding risk exposure. Professor Kennedy noted that the new bankruptcy law's stay provisions align with Commission recommendations, and the concept of recoverable value as adequate protection draws from earlier drafts of the Bankruptcy Code. The effective date of the plan is crucial for valuing property, reflecting the time value of money. The bankruptcy court highlighted a conflict between the Ninth and Fourth Circuits on related issues, noting that if a creditor is oversecured, "loss of use" payments could lead to interest accumulation that diminishes the impact of delayed payments. The principle outlined in the Code indicates that the bankruptcy process should not allow creditors to assert greater rights than those existing prior to bankruptcy, which contradicts the recognition of non-bankruptcy creditors' rights under state law within the bankruptcy framework. A motion filed under Section 362(d) to lift the automatic stay remains in effect for 30 days unless the court orders otherwise after a preliminary hearing, which must occur within 30 days of the motion being filed. If no action is taken by the court, the stay expires 30 days from the final hearing commencement. Local rules in the Southern District of Texas limit notice requirements for such motions to specific parties, including the debtor, the unsecured creditors' committee (if appointed), lienholders on the property, and the twenty largest unsecured creditors. This is crucial, especially when motions are filed shortly after a bankruptcy petition, as it may leave other creditors unaware of significant implications for their claims. A secured creditor's entitlement to postpetition interest under Section 506(a) is contingent upon the completion of the trustee's handling of the collateral. Section 506(b) stipulates that postpetition interest can only be allowed if the creditor is oversecured after the trustee has been compensated for preservation or disposal costs related to the collateral, and such expenses cannot be determined until incurred. Furthermore, following the American Mariner ruling, an anticipated increase in Section 362 motions is likely, reflecting a trend in the Southern District of Texas Bankruptcy Court, where statistics on such motions are not typically maintained. The text suggests that deviating from established practices could undermine the effectiveness of Chapter 11 reorganizations, particularly for agricultural entities. A total of 362 motions were filed under Sections 362 in Chapters 7, 11, and 13, with the majority occurring in Chapters 11 and 13. From August 1983 to March 1986, statistical analysis showed a significant increase in motions for relief from the stay. In late 1983, there were 1,175 motions filed, yielding a rate of 92 motions per 100 new cases. This rate rose to 135 in 1984, 151 in 1985, and further to 163 in early 1986. The monthly average of motions surged from 235 in late 1983 to 792 by early 1986, coinciding with a 90% increase in new Chapter 11 and 13 cases during the same period. In the specific case discussed, an undersecured creditor's entitlement to postpetition interest is addressed. Under the bankruptcy court's order, interest payments are sourced from collateral (rents), not from unencumbered assets. The situation is highlighted as peculiar since it provides "adequate protection" to the undersecured creditor by utilizing the collateral itself, unlike oversecured creditors who must wait until the case concludes for such payments. An existing cash collateral order indicates that net rents are being used for debt service, but the bankruptcy court's order could theoretically alter the classification of these payments. However, due to inadequate net rents to cover full interest payments, the practical effect of the adequate protection order serves mainly to lift the stay. Previous case law is referenced, indicating that undersecured creditors lack a right to postpetition interest but may receive the present value of their collateral due to potential harm from the stay. In In re Virginia Foundry Co., the court decided to lift the stay, reasoning that immediate foreclosure would allow the creditor to invest proceeds at market rates, which constituted adequate protection for a secured note. The court did not clarify the creditor's secured status or address interest provisions under the Bankruptcy Code. In re Monroe Park was the first case mandating postpetition interest for undersecured creditors due to delays caused by the automatic stay, also neglecting interest provisions. In re Langley has been referenced for allowing monthly postpetition interest payments to undersecured creditors but specifically involved a marginally oversecured creditor. Following the Ninth Circuit's decision in American Mariner in 1984, several lower courts adopted its principles, often referencing American Mariner without further examination. Numerous cases from the Ninth and Fourth Circuits arose under this influence, where American Mariner and Grundy serve as binding precedents. Scholarly support for the American Mariner rule is limited, with early proposals for periodic postpetition interest payments made by Patrick A. Murphy and later expanded by Professor Thomas Jackson, who acknowledged inconsistencies with the Bankruptcy Code’s language and legislative history. Jackson's model has been critiqued for lacking statutory clarity, potentially leading to judicial interpretations that allow adequate protection independent of market pricing mechanisms. Professor Jackson submitted an amicus brief in the American Mariner case, referencing a commentary by Molbert, which argues that undersecured creditors should receive interest payments for any period exceeding 120 days after the petition's filing due to the "equities" involved in the reorganization process. A notable attempt to align this proposal with the Bankruptcy Code's legislative history was made by a student author, who acknowledged the absence of explicit guidance on whether adequate protection should include time value compensation. The prevailing opinion among commentators is that there is limited support for this approach within the Code and its legislative history. In examining the American Mariner case, the court highlighted factors for consideration regarding adequate protection, such as the duration of the stay, the depreciation of collateral, the payment of taxes to avoid statutory liens, and the chances of successful reorganization. Some lower courts have shown a willingness to grant "opportunity costs" in cases with a low likelihood of successful reorganization, although this is not mandated by law. Overall, most lower courts prior to and following the American Mariner case have concluded that secured creditors are entitled only to protection against declines in the value of their collateral. Key cases supporting this view include In re South Village, Inc. and In re Alyucan Interstate Corp., among others. These decisions emphasize that adequate protection is designed to prevent a decrease in collateral value during an automatic stay. Opportunity cost payments in 1124 proceedings are deemed "inappropriate and of dubious universal application" at the triage stage. According to Section 361, adequate protection is required only to prevent a decrease in the value of collateral, focusing on maintaining the lien's value. Various authors challenge the interpretation of Section 361's legislative history presented in "American Mariner," highlighting inconsistencies and analytical difficulties in its approach. Section 361 aims to protect against asset loss, ensuring that creditors' positions are preserved from the onset of bankruptcy proceedings. Creditors are entitled to protection from any erosion of collateral value during these proceedings and may foreclose if necessary. The interpretation of Sections 361-362(d)(1) has evolved, with earlier sources misreading the legislative intent. A citation from Rep. Edwards in support of creditor benefits was taken out of context, as it addressed administrative issues rather than adequate protection or postpetition interest payments. In *In re Rankin*, 49 B.R. 565 (Bankr.W.D.Mo.1985), the court addressed the relationship between interest and adequate protection provisions under the Bankruptcy Code. It ruled that an undersecured creditor cannot accrue interest after the filing date per Section 506(b). Although interest cannot be awarded in its traditional form, it may be compensated in a different manner. Courts that have denied postpetition interest to undersecured creditors highlight the inherent conflict between the creditor's arguments and the interest provisions. The document emphasizes the necessity of a present value analysis under Section 361 and recognizes that bankruptcy laws significantly alter the original agreements between debtors and creditors. Furthermore, it points out that denying postpetition interest could undermine lenders' trust in credit arrangements. The court also noted the contrasting proposals of the Senate and House versions of Section 361 regarding adequate protection, with the Senate version being more restrictive. The analysis reflects a balance between satisfying creditors’ expectations and providing equitable treatment for debtors. The Court indicated that the protection afforded to a secured creditor should focus on the value of their collateral rather than merely their rights to specific collateral. This interpretation aligns with the broad definition of "value" in section 361, suggesting that adequate protection is not limited solely to collateral value. The House Report on section 361 does not restrict adequate protection to the constitutional protections established in Wright. The Senate's version of section 361 was deemed "restrictive" compared to the House version, primarily because it provided creditors with more explicit protections without requiring them to accept uncertain administrative priorities or vague relief options. Under the Senate's proposal, relief would be granted within 30 days of a hearing, contingent on the absence of equity in the property, which favored creditors more than the House's proposal. The House bill's only expansive element was its accompanying report language, which was not incorporated into the actual legislative text. Critics argue that the House Report's attempts to clarify adequate protection principles create confusion rather than enhance understanding, as the new code does not significantly innovate but rather adopts established judicial practices from the Bankruptcy Act.