Opinion ID: 472139
Heading Depth: 3
Heading Rank: 1

Heading: Commission Proposals.

Text: 58 In response to numerous calls for reform of the bankruptcy laws, Congress established the Commission on Bankruptcy Laws of the United States in 1970. After two years of research and public and private meetings, the Commission submitted a report on the bankruptcy laws and draft legislation to correct perceived inadequacies in the Act, particularly in the area of administration. The draft legislation accompanying the Report proposed to codify the common law standards for adequately protecting secured creditors during the pendency of the automatic stay. Report of the Commission on the Bankruptcy Laws of the United States, H.R.Doc. No. 137, pt. II, 93d Cong., 1st Sess. 236-37 (1973) [hereinafter cited as Commission Report ]. 21 The official comments accompanying the proposed legislation explained the purpose of the section: 59 1. This section is new. It is essentially a codification of such cases as In re Yale Express System, Inc., 384 F.2d 990 (2d Cir.1967) and In re Bermec, 445 F.2d 367 (2d Cir.1971). See generally Festersen, Equitable Powers in Bankruptcy Rehabilitation: Protection of the Debtor and the Doomsday Principle, 46 Am.Bankr.L.J. 311, 324-33 (1972).... 60 3.... No attempt has been made to codify the case law as to when the use of collateral must cease or as to the adequacy of protection in any given situation. This is left to case-by-case development by the courts. A benchmark in determining the adequacy of protection is the liquidation value of the collateral at the date of the petition. This is analgous [sic] to the cram down provision of Sec. 7-303(7). Conditions which may be imposed by the court, when appropriate, include (1) requiring other security of an equivalent value; (2) if there is no equity or the equity is marginal, requiring additional security to the extent of the anticipated decrease in the value of collateral as a result of use; and (3) giving a priority if it is clear that the proceeds of the liquidation of the property of the estate available to pay the claim will be sufficient. 61 Id. at 236-37 (emphasis added). The objective of the Commission's proposal was to permit use of the property subject to payments or other transfers that would compensate the secured creditor for the decline in recoverable value. Nimmer, Secured Creditors and the Automatic Stay, 68 Minn.L.Rev. 1, 8 (1983). The Commission's suggested standard for relief from the automatic stay clearly would not have allowed periodic interest payments for the delay in enforcing foreclosure rights. 62