Cross-Collateralization

Taking a security interest in collateral to secure multiple loans. Condemned by the courts if directly securing prepetition debt with postpetition collateral in cash collateral and financing orders but usually allowed if indirectly accomplished by the sleight of hand technique of extending a “new” loan postpetition that pays the prepetition loan in full.

See also Cash Collateral Order, DIP Financing, Roll-Over.

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