June 3rd, 2016 By Virtual Paralegal Services

If your client is close to losing a secured asset, such as a house or car, setting up adequate protection payments with the creditor may be the answer to saving their property. Adequate protection payments are used to satisfy creditor cries for immediate payments since claims in bankruptcy don’t start paying until the case is confirmed. In some cases, it could be months before a creditor will see a payment and for creditors who have been dealing with a delinquent account, this doesn’t sit well.

So, if there’s a creditor that’s pushing for relief from stay in your client’s case, bringing up the option of adequate protection payments may be enough for them to withdraw their motion for relief. Just know that creditors are typically a bit untrusting of a debtor to follow through on their commitment to pay, so you’ll need to draft a filing that outlines the conditions of the adequate protection payments.

Language for Adequate Protection

Depending on the complexity of the case, there’s no telling how long it will take for the case to get confirmed. That’s why it’s key to have the language reflected in your motion for adequate protection flexible so it can adjust with the ebb and flow of the case. You’ll need to include:

  • Payment Amount: This is the most important aspect. Be sure to come to this figure after thorough evaluation of your debtor’s finances, so you won’t have to do any amending down the road. Try to get the amount for the adequate protection payment to match what the claim amount through the plan will be once it’s confirmed.
  • Creditor Information: Be sure the trustee has the payment address for the creditor. Claims won’t get setup for payment until the case is confirmed and are generally taken off the proof of claim. If the need for adequate protection payments is required early in the case, it’s possible the creditor hasn’t filed a proof of claim so you’ll need to provide the necessary information to the trustee so they can set up the claim for payment.
  • Debtor Payments: Plan payments start 30 days after the filing of the petition. You’d be amazed by how many debtors don’t understand this and miss the first few payments. If your client is doing adequate protection payments, it’s even more important they stay current on their payments. A creditor has the right to pursue a relief from stay if the terms negotiated in the motion aren’t upheld. Patience is thin for most creditors in this situation. They probably have been dealing with delinquent payments for quite some time. Be sure your client understands that if they miss a payment, they may lose their property. Adequate protection is a great way to resolve a frustrating situation, both for the creditor and debtor. When done properly, it’s a win-win for all involved.

Motions can be complex in bankruptcy. That’s why Virtual Paralegal Services has a team of paralegals with years of experience who can handle bankruptcy issues. Let our experienced team of paralegals do the hard work for you so you can do more.

Contact us today to find out how we can help.

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