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interest. The bankruptcy court held it was appropriate for the debtor to reserve some funds to enhance feasibility of the reorganization and to be able to pay more on the bank's claims, and the Seventh Circuit held that conclusion was not clearly erroneous. It would have been a greater contribution to this area of confirmation law if the court had instead held as a matter of law that "artificial impairment" is not a concept that has any basis in the Code, as Bankruptcy Judge Paine held in Creekstone, instead of leaving yet another factual issue for evidence and findings in bankruptcy courts. Perhaps courts will ultimately reach that conclusion, as did the Bankruptcy Review Commission, based on the Bankruptcy Reform Act's repeal of § 1124(3).
In § 1129(b)(2)(A), the Code neatly outlines three possible methods of treating a secured claim, over the holder's objection: (1) retention of the lien and payment of present value of the value of the lien; (2) sale of the collateral free and clear of the lien, with the creditor having the right to credit bid and the lien to apply to the proceeds; and (3) provision of the "indubitable equivalent" of the claim.
In income producing single asset cases, Timbers has caused some debate on how postpetition proceeds should be accounted for in valuing an undersecured creditor's security interest. If adequate protection payments are made to an undersecured creditor from sources that are not part of its collateral, then they must be applied to reduce the principal amount of the secured claim, rather than the total claim, because payment could not be made on an unsecured debt and Timbers prevents the payments from being applied to interest. The most authoritative holdings to this effect are probably the Seventh Circuit's holding in Wabash and the Ninth Circuit BAP's holding in Weinstein. Taken to its logical extreme, this could render an undersecured creditor more than adequately secured during the pendency of a case, resulting in denial of stay relief on the ground of adequate protection even though the
