An assessment payable from a creditor’s collateral of the reasonable, necessary costs incurred by the bankruptcy estate to preserve or dispose of the collateral. The assessment is limited to the extent of the benefit realized by the creditor. Creditors sometimes consent to a surcharge of their collateral, but the court has the power to surcharge the creditor’s collateral over its objection. Lenders frequently require as a condition to their agreement to a DIP Financing Order or Cash Collateral Order that the debtor waive any right to surcharge the lender’s collateral.

Bankruptcy Code § 506(c). See also Carveout, Cash Collateral Order, DIP Financing Order.

Email Term