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From Cradle to Grave: Using Bankruptcy Skills to Advise Clients on New Deals

By Shelly Rothschild
November 30, 2004

Part Two of a Two-Part Article

Last month, we discussed the fact that of the many hats worn by leasing attorneys, one is of the bankruptcy practitioner. It is a skill set that usually comes into play at the end of a transaction gone bad. This article continues outlining the case for ending this practice and having bankruptcy counsel get involved in lease deals from the outset.

SIXTH RULE: GET A SECURITY INTEREST. Unsecured creditors may be last on line to get a distribution in a bankruptcy case, if any, and are unable to obtain relief from the stay to enforce their remedies. Secured creditors also get post-petition interest and attorneys' fees to the extent that the value of their collateral exceeds the amount of their pre-petition claim. They also are entitled to adequate protection if their collateral is used or sold, and have special protections in a cram down, giving them great leverage in a bankruptcy case. Accordingly, bankruptcy lawyers know that it is a good idea to find out what free assets a debtor has before the deal is done and bargain for a first priority security interest.

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