In re LTV Steel Co. - 274 B.R. 278 (Bankr. N.D. Ohio 2001)

Rule:

11 U.S.C.S. § 541(a) provides that upon the filing of a bankruptcy petition an estate is created consisting of all legal or equitable interests of the debtor in property as of the commencement of the case. 11 U.S.C.S. § 541(a)(1). The estate created by the filing of a Chapter 11 petition is very broad, and property may be included in debtor's estate even if debtor does not have a possessory interest in that property.

Facts:

Creditor's transaction had been an asset-backed securitization, where creditor loaned funds to debtor, debtor transferred receivables to a new entity, and new entity granted the security interest to creditor. Creditor filed an emergency motion for modification of an interim order allowing debtors to use cash collateral in which creditor had an interest. Creditor asserted it was deprived of due process as it had insufficient notice of the cash collateral hearing, that debtor had no interest in the receivables, and it was not adequately protected.

Issue:

Should the interim cash collateral order be modified because the cash collateral was not the property of the debtor’s estate?  

Answer:

No.

Conclusion:

The court found creditor and its agent had actual notice of the cash collateral hearing, the agent had a full and fair opportunity object, and creditor was in direct communication with its agent before the hearing. The order provided adequate protection. Elaborate post-deprivation procedures had been established and a final hearing was set. Debtor had a significant interest in the cash collateral, without which debtor would have immediately ceased business. According to the court, the debtor had at least an equitable interest in the receivables which was property of the estate sufficient to support the order. Moreover, the use of the receivables would increase the value of post-petition receivables in which creditor had a security interest. There was a sufficient equity cushion. The motion was overruled.