{"id":32449,"date":"2016-03-31T19:23:10","date_gmt":"2016-04-01T00:23:10","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/eighth-circuit-secured-creditor-s-collateral-can-be-surcharged.html"},"modified":"2016-08-02T12:45:52","modified_gmt":"2016-08-02T17:45:52","slug":"eighth-circuit-secured-creditor-s-collateral-can-be-surcharged","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/finance\/eighth-circuit-secured-creditor-s-collateral-can-be-surcharged.html","title":{"rendered":"Eighth Circuit: Secured Creditor’s Collateral can be Surcharged to Pay for Chapter 11 Administrative Expenses"},"content":{"rendered":"
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A Chapter 11 debtor’s post-bankruptcy workers’ compensation premiums can be surcharged against a secured creditor’s collateral despite the general rule prohibiting such surcharge. The Eighth Circuit Court of Appeals recently ruled that Section 506(c) allows a surcharge when there is express or implied consent to the expense by a secured creditor<\/a>.<\/p>\n

The Hartford Case<\/b><\/p>\n

In Hartford Underwriters Ins. Co. v. Magna Bank, N.A<\/i>. (July 27, 1998), the Eighth Circuit found the requisite consent in a post-bankruptcy financing agreement between the debtor and the secured creditor, which provided for the debtor’s payment of ordinary and necessary operational expenses including insurance premiums. When the debtor’s reorganization efforts failed, and the case was converted to Chapter 7<\/a>, the workers’ compensation insurer asserted an administrative expense for unpaid premiums under Section 503 of the Bankruptcy Code and a surcharge against the secured creditor’s collateral under Section 506(c).<\/p>\n

Under Section 506(c), a surcharge is allowable where:<\/p>\n