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Secured debts and liens
Adequate protection
Adequate protection in bankruptcy is what a secured creditor gets to make up for a drop in the value of its collateral while the automatic stay holds it off or the property is being used. It covers the loss in value, not the whole loan. 1
Talk to a lawyerHow it works
It can take the form of a cash payment or periodic cash payments, an additional or replacement lien, or other relief that gives the creditor the full equivalent of its interest. 1
In Chapter 13 it usually shows up as adequate protection payments. If secured loan or lease payments, typically home and car payments, come due before the plan is confirmed, the debtor makes adequate protection payments directly to the lender or lessor. For a car or other personal property bought on credit, the law sets these payments for the part of the debt that comes due after the case begins, unless the court orders otherwise, and the court can change, increase or reduce them before confirmation. 2 3
It matters most when a creditor asks the court to lift the stay. The court must grant relief from the stay for cause, and a lack of adequate protection is a cause the law names. At that hearing the creditor must prove the debtor's equity in the property, while the side opposing relief carries the burden on the other issues, such as whether the creditor is adequately protected. 4
Common questions
What are adequate protection payments in Chapter 13?
What can a lender do if it is not adequately protected?
It can ask the court for permission to act against the property despite the automatic stay. The court decides after notice and a hearing. 4
Does the automatic stay still cover my car in the meantime?
Generally yes. The automatic stay covers attempts to repossess or take control of property, unless the court grants a creditor relief from it. 4
Sources
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