- equity cushion
USAA theory adopted by some bankruptcy courts to determine whether there is cause to lift the automatic stay with respect to a secured creditor for lack of adequate protection. An equity cushion exists if the value of the collateral exceeds the value of the creditor's claim (the creditor is oversecured). The excess value, if any, is treated as an equity cushion which sufficiently protects the creditor without the need for adequate protection. Any junior liens on the property are not considered in determining whether there is an equity cushion because they will be subordinated to the liens of senior creditors.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
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