Rents and Profits in Bankruptcy - A Nebraska Primer and Consideration of L.B. 14

Abstract

INTRODUCTION|The commencement of a bankruptcy case adversely affects a creditor's right to rents and profits derived from the debtor's property. The Bankruptcy Code ("Code") supersedes inconsistent state law. Under the Code, creditors are presented with a virtual myriad of legal issues for potential litigation due to a disparity in the decisional law concerning rents and profits in bankruptcy cases. Specific issues include: 1) whether rents and profits are property of the bankruptcy estate; 2) whether a creditor, having collected rents and profits, must turn them over to the debtor upon the filing of bankruptcy; 3) whether interests in rents and profits that are not "perfected" at the date of bankruptcy may be avoided by the trustee or debtor-in-possession; 4) whether the bankruptcy court may and should exercise its discretion to cutoff a creditor's interest in rents and profits based on the equities of the case; 5) whether rents and profits constitute "cash collateral," subject to Code section 363 restrictions; and finally...