Publications

Camouflaged Collateral: "All Asset" Liens May Not Include Proceeds of D&O Insurance Policies in Bankruptcy

March 21, 2011
Bloomberg Bankruptcy Law Report

As its borrower begins the downward spiral toward bankruptcy, the prudent secured lender will analyze its collateral package to ensure that its liens are properly perfected. Because a secured lender can perfect liens on substantially all of a borrower’s assets by filing a UCC‐1 financing statement referencing broad categories of collateral, most of its analysis can be quickly completed through a simple lien search. There may be collateral lurking in a borrower’s asset portfolio, however, that is not easily identified or covered by the Uniform Commercial Code's generic categories. It is this "camouflaged" collateral that creditors' committees and chapter 7 trustees often will attack as they seek to create value for their constituencies ‐ especially in cases involving undersecured lenders.