Brian Lacoff

Document Type

Research Memorandum

Publication Date




In In re Dispirito, a decision of importance to Chapter 13 debtors’ attorneys, the Bankruptcy Court for the District of New Jersey ruled that an undersecured creditor was entitled not only to adequate protection payments, but that the section 507(b), 11 U.S.C. § 507(b) (2006), “super-priority” status of the inadequate adequate protection provided during the case meant that the Chapter 13 plan had to pay those amounts before paying any of the debtor’s attorneys fees. 371 B.R. 695, 695 (Bankr. D.N.J. 2007). This article will compare how the Dispirito court’s ruling compares to other bankruptcy court’s rulings. It will also analyze “super-priority” status in the context of benefits it confers to creditors and debtors and if it furthers bankruptcy law principles in general. It is the opinion of this author that the Dispirito court erred in its ruling, and in fact will likely hurt Chapter 13 proceedings without conferring much of a benefit to creditors.

Part II will examine the concept of adequate protection and what rights section 507(b) of the Bankruptcy Code confers to creditors in the context of adequate protection payments. Part III will discuss the Dispirito decision, analyzing how and why the court arrived at its decision. Part IV will discuss how other courts have ruled on this issue, giving perspective on how other bankruptcy courts have dealt with the issue of adequate protection and “super-priority, and whether Dispirito is consistent with these holdings. This article will conclude with a brief overview of how the Dispirito decision may, in fact, be against the goals of bankruptcy law and might potentially injure both creditors and debtors.



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