---
kind: "section"
citation: "7 C.F.R. § 1980.475"
title: "7"
number: "1980.475"
heading: "Bankruptcy."
url: "https://uscodex.org/cfr/7/1980.475"
---

# §1980.475. Bankruptcy.

- (a) It is the lender's responsibility to protect the guaranteed loan debt and all the collateral securing it in bankruptcy proceedings. These responsibilities include but are not limited to the following:
  - (1) The lender will file a proof of claim where necessary and all the necessary papers and pleadings concerning the case.
  - (2) The lender will attend and where necessary participate in meetings of the creditors and all court proceedings.
  - (3) The lender, whose collateral is subject to being used by the trustee in bankruptcy, will immediately seek adequate protection of the collateral.
  - (4) Where appropriate, the lender should seek involuntary conversion of a pending Chapter 11 case to a liquidating proceeding under Chapter 7 or under [Section 1123(b)](/cfr/7/1123.md?p=b) (4) or seek dismissal of the proceedings.
  - (5) When permitted by the Bankruptcy Code, the lender will request modification of any plan of reorganization whenever it appears that additional recoveries are likely.
  - (6) Rural Development will be kept adequately and regularly informed in writing of all aspects of the proceedings.
- (b) In a Chapter 11 reorganization, if an independent appraisal of collateral is necessary in Rural Development's opinion, Rural Development and the lender will share such appraisal fee equally.
- (c) Expenses on Chapter 11 reorganization, liquidating Chapter 11 or Chapter 7 (unless the lender is directly handling the liquidation) cases are not to be deducted from the collateral proceeds.
- (d) **Estimated loss payments.** See paragraph XVI of Form RD 449-35.

## Notes

### Source

Source: 52 FR 6501, Mar. 4, 1987, unless otherwise noted.

### Authority

Authority: 5 U.S.C. 301; 7 U.S.C. 1989. Subpart E also issued under 7 U.S.C. 1932(a).