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What is cash collateral in reference to Chapter 11 bankruptcy?

Our Professional Answer

Many Chapter 11 debtors have granted a lien against their cash receivables. When they file a Chapter 11, those cash receivables are now potentially not available to use to pay their day to day operations costs. We call this cash collateral. In order to utilize these funds you must go to the court and the creditor who you’ve granted the lien to and ask them for a cash collateral agreement where you agree exactly what you’ll use their cash collateral to spend on in the daily operations of your business.