Cash Collateral

Cash that is subject to a security interest. To use such cash – almost always a pressing need – a debtor must get either consent from the secured lender or authorization from the bankruptcy court. Consent comes at the cost of concessions required by the secured lender (such as enhanced reporting obligations and periodic cash payments).  Where a court authorizes the use of cash collateral notwithstanding the secured lender’s refusal to consent, the secured lender is entitled to adequate protection of its collateral (usually in the form of payments or liens on unencumbered property) to compensate it for any deterioration of its collateral through the debtor’s use of it.

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