MEMORANDUM OF DECISION
This Chapter 11 case is before the court on the motion of the debtor in possession to pay a $10,000 postpetition retainer to its counsel, Altheimer & Gray. The only funds available to pay the requested retainer are cash collateral, which can be used only if the interest of the creditor in the debtor’s property is adequately protected. As discussed below, the interest of a secured creditor, for purposes of adequate protection, should be measured as of the beginning of the case. With this ruling, the pending motion will be set for a hearing at which the debtor will have the *768 burden of demonstrating that the interests of the secured creditors in the present case will not be harmed by payment of the requested retainer.
Findings of Fact
This is a single-asset real estate case, commenced by a voluntary Chapter 11 petition filed on May 4, 1995. The debtor, Addison Properties Limited Partnership, is an Illinois limited partnership that, through a land trust, owns seven apartment buildings (the “property”). Three creditors have secured interests in the property. The first priority security interest is held by Home Savings of America, F.A. (“Home Savings”). Second and third priority security interests are held, respectively, by Inland Mortgage Investment Corporation (“Inland Mortgage”), and Addison Court Limited Partnership (“Addison Court”). All three creditors also hold separate security interests in the rents and income generated by the property. The parties agree that, at the time of the filing of the bankruptcy case, Home Savings was overse-cured, but the extent to which the claims of Inland Mortgage and Addison Court were secured is in dispute. Either there was enough collateral value to secure only part of Inland Mortgage’s claim (leaving Addison Court’s claim wholly undersecured), or there was enough collateral value to secure all of Inland Mortgage’s claim and part of Addison Court’s. In either event, one of the creditors held a partially secured claim.
Since early June, the debtor has been operating the property under an agreed cash collateral order that provides (1) for the ordinary operation and maintenance of the property, (2) for segregation of funds for payment of real estate taxes, (3) for regular payments on Home Savings’ mortgage, and (4) for the retention by the debtor of all remaining proceeds (estimated to be about $26,000 through September). The order specifically prohibits the debtor from paying fees to counsel or other bankruptcy professionals except pursuant to court order.
The issue presently before the court arises in connection with the debtor’s employment of legal counsel. Pursuant to Section 327 of the Bankruptcy Code (Title 11, U.S.C., the “Code”), the debtor applied for and obtained court approval to employ a Chicago law firm, Altheimer & Gray (“A & G”), as its bankruptcy counsel. There was no objection to this employment. However, the debtor also sought authorization to pay to A & G a retainer of $10,000. The only source for the payment of such a retainer would be net rental proceeds collected by the debtor. Home Savings raised no objection to payment of the proposed retainer, but Inland Mortgage and Addison Court did object, and, after discussion between counsel and the court, the matter was briefed and taken under advisement.
Conclusions of Law
Background.
The legal background of the present dispute is not complicated. A & G is apparently seeking payment of a retainer in order to reduce the risk that it will not be paid for the services it is providing to the debtor. The fees of bankruptcy professionals employed by a debtor in possession are administrative expenses — awarded under Section 330(a) or Section 331 of the Bankruptcy Code, accorded administrative status by Section 503(b)(2), and assigned a first priority by Section 507(a)(1). However, status as an administrative claim is often insufficient to guarantee payment. If there are not enough assets in a debtor’s estate to pay all administrative claimants in full, the claimants are paid pro rata, and any payment made on an interim basis, pursuant to Section 331, is subject to disgorgement.
In re Lochmiller Industries, Inc.,
*769 The debtor cannot, however, pay the requested retainer on its own authority. Section 363(b)(1) of the Code provides that a trustee (and hence, a debtor in possession) may use estate assets out of the ordinary course of business only after notice and a hearing. 2 Paying bankruptcy professionals is not in the ordinary course of business. More pertinently, Section 363(c)(2) provides that a trustee may not use cash collateral unless each creditor holding an interest in the collateral consents, or unless the court, after notice and a hearing, authorizes the use. The rents from the debtor’s property are, according to the uncontested allegations of the secured creditors, cash collateral. 3 Because Inland Mortgage and Addison Court oppose the use of the rents to pay the retainer sought by A & G, this court must decide whether to authorize the use of cash collateral under Section 363(c)(2) for that purpose.
In making that decision, adequate protection is the key issue. It is well established that cash collateral may appropriately be used to pay administrative expenses, like A & G’s requested retainer, if the interest secured by the collateral is adequately protected, but not otherwise.
In re James Wilson Assocs.,
Although the question was once in substantial doubt, it is now established that “adequate protection” is meant only to assure that a secured creditor does not suffer a decline in the value of its interest in the estate’s property, rather than to compensate the creditor for the bankruptcy-imposed delay in enforcing its rights in that property.
United Savings Ass’n of Texas v. Timbers of Inwood Forest Assocs., Ltd.,
The ultimate question raised by the pending motion is thus whether payment of the retainer sought by A & G would cause or threaten a decline in the value of the interests of the objecting secured creditors in the property of the debtor’s estate. That question is a difficult one, because it requires a determination of the protectible interest of the secured creditors. The determination of the interests of secured creditors, for purposes of adequate protection, in the context of an assignment of rents, is not directly addressed by the Bankruptcy Code, and has produced a large number of conflicting judicial opinions and academic commentaries. 4
The relevant Code provisions. There are at least four provisions of the Bankruptcy Code that bear on the protectible interest of a secured creditor, holding both a mortgage and an assignment of rents, in property of a debtor’s estate.
• Claim bifurcation. Initially, the interest of a secured creditor in property of the estate may be affected by Section 506(a) of the Code. This is the provision that bifurcates undersecured claims. Under Section 506(a), the total claim (“[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest”) is split into (1) a secured claim, to the extent of the collateral value that supports the claim (“the value of such creditor’s interest in the estate’s interest in such property”) and (2) an unsecured claim to the extent that it is not supported by collateral value (the amount by which “the value of such creditor’s interest ... is less than the amount of such allowed claim”). 5
• Costs of preservation. Section 506(c) has the effect of reducing the amount of collateral that secures a creditor’s claim by allowing a trustee (or debtor in possession) to “recover from property securing an allowed secured claim, the reasonable, necessary costs and expenses of preserving ... such property.” This deduction from collateral, however, is limited to “the extent of any benefit to the holder” of the claim secured by the collateral. 6
• Proceeds of collateral. Section 552(b) has the effect of increasing the amount of collateral that secures a claim. Although Section 552(a) provides that property acquired by an estate postpetition is generally not subject to any lien resulting from a pre-petition security agreement, Section 552(b) allows prepetition security interests to extend to various proceeds of the prepetition collateral, including, in Section 552(b)(2), “amounts paid as rents” of the collateral. This extension of liens is expressly subject to Section 506(e), as well as to various avoidance provisions of the Code, and is subject to an “equities of the case” exception, allowing a court, after notice and a hearing, to order *771 that the lien not extend to certain rents. 7
• Postpetition interest and costs. Ordinarily, claims in bankruptcy are not allowed to accrue interest postpetition; thus, Section 502(b) provides for the disallowance of any claims for interest that is unmatured as of the date of the filing of the bankruptcy petition. However, Section 506(b) provides an exception to this rule for oversecured claims. It allows the amount of a secured claim to be increased by postpetition interest (and by “reasonable fees, costs or charges provided for under the agreement under which such claim arose”) to the extent that the collateral value exceeds the secured claim. Again, this provision is expressly subject to the reduction of collateral allowed by Section 506(c). 8
Judicial application. In applying these provisions to bankruptcy cases involving adequate protection of claims secured by mortgages and assignments of rents, the judicial decisions generally suggest two approaches to determining proteetible interest, each of which presents difficulties.
1. Single valuation.
The simpler of the two approaches is employed in several of the decisions cited by the debtor, including
Confederation Life Insurance Co. v. Beau Rivage Ltd.,
The Reddington/Sunarrow case presents a useful example of the single valuation approach. Reddington/Sunarrow, like the present case, was a single-asset Chapter 11 real estate ease, involving an apartment complex. The real property, at the time of filing of the case, was worth $4.6 million. It served as security for a claim, as of the time of filing, of $5.4 million. The secured creditor also had an assignment of rents, and, during the course of the bankruptcy, the property generated net rents of $600,000 (the debtor having been allowed to use the remainder of the rents, presumably to maintain the property). The underlying property did not decline in value during the bankruptcy. The issue in the case was how the net rents should be treated.
The court addressed the issue in two steps. First, it concluded that the interest of a secured creditor should be established at the date of filing, relying particularly on the *772 Court of Appeal’s decision in the Timbers case:
When Timbers was before the Fifth Circuit, the court’s view was that Congress intended that a secured creditor be adequately protected only for the fixed amount of its allowed secured claim, an amount that is strictly limited to the value of the property securing the debt. In re Timbers of Inwood Forest Assoc., Ltd.,793 F.2d 1380 , 1386-87, n. 7 (5th Cir.1986) [aff'd sub nom. United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd.,484 U.S. 365 ,108 S.Ct. 626 ,98 L.Ed.2d 740 (1988)]. The court decided that the amount of the allowed secured claim should be determined as of the date of filing the petition. Id. at 1387.
The single valuation approach can be illustrated graphically. In the following chart, a bankruptcy is posited in which the debtor has fixed assets worth $75 at the time of filing, securing a total claim of $100, and generating net cash proceeds of $2.50 per month. As in Reddington/Sunarrow, the value of the secured claim is fixed at the time of filing; the amount of that claim defines the secured creditor’s interest subject to adequate protection, and is the secured claim for purposes of confirmation. Since the underlying collateral does not decline in value, the net cash proceeds are available for use by the debtor.
*773 Chart 1: Single Valuation Nonfluctuating Fixed Assets; Regular Cash Proceeds
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a. Effect of single valuation.
The practical consequence of single valuation is to balance the bankruptcy process in favor of the debtor in any case where the major creditor is secured by both the debtor’s assets and by the income that those assets produce. As facts of
Reddington/Sunarrow
demonstrate, and as Chart 1 reflects, the longer a debtor remains in bankruptcy, accumulating income, the better will be its chances of confirming a plan, since the accumulated cash may be used to reduce the creditor’s secured claim, which does not increase during the pendency of the ease.
See In re Vermont Inv. Ltd. Partnership,
*774 b. Difficulties with single valuation. The single valuation approach to determining the protectible interest of a creditor secured by an assignment of rents has been subject to substantial criticism on at least three grounds. While the first two of these grounds are less compelling, the third presents a genuine conflict between the single valuation approach and the language of the Bankruptcy Code.
i. Dewsnup v. Timm.
Several of the decisions rejecting single valuation have pointed to a statement in the Supreme Court’s decision in
Dewsnup v. Timm,
ii. Section 552(b). A second criticism directed at the single valuation approach is that it fails to give effect to Section 552(b), which, as noted above, allows certain prepetition liens to extend to postpetition proceeds, including rent. In Timbers, the Supreme Court contrasted the effect of Section 552(b) with the claim made by the secured creditors in that case to adequate protection payments for the use value of their collateral:
Section 552(b) ... makes possession of a perfected security interest in postpetition rents or profits from collateral a condition of having them applied to satisfying the claim of the secured creditor ahead of the claims of the unsecured creditors. Under [creditor’s] interpretation, however, the undersecured creditor who lacks such a perfected security interest in effect achieves the same result by demanding the “use value” of his collateral under § 362.
Hi Separate valuation for confirmation.
The remaining criticism of the single valuation approach is based on the second sentence of Section 506(a), the bifurcation provision of the Code. It states that the valuation of the claims of a creditor secured by property of the estate shall be determined (1) "in light of the purpose of the valuation and of the proposed disposition or use of such property”, and (2) “in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.” On its face, this language appears to contradict the idea that there can be only a single valuation of a secured creditor’s interests: the language appears to require, at the very least, that there be a separate valuation hearing, with claim bifurcation, in conjunction with any hearing on plan confirmation. This was the holding of
In re Landing Associates, Ltd.,
This criticism of single valuation is well grounded. Apart from the actual text of Section 506(a), the legislative history forcefully rejects single valuation. As proposed in the original draft of the legislation that became the Bankruptcy Code — H.R. 8200, 95th Cong., 1st Sess. (1977) — Section 506(a) provided only for bifurcation. It read, in its entirety:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, and is an unsecured claim to the extent that such value is less than the amount of such allowed claim.
The Senate, in S.2266, 95th Cong., 2d Sess. (1978), added the language that now appears in the second sentence of Section 506(a). The change was quite intentional, according to the report that accompanied the bill:
While courts will have to determine value on a case-by-case basis, the subsection makes it clear that valuation is to be determined in light of the purpose of the valuation and the proposed disposition or use of the subject property. This determination shall be made in conjunction with any hearing on such disposition or on a plan affecting the creditor’s interest. To illustrate, a valuation early in the case in a proceeding under sections 361-63 would not be binding upon the debtor or creditor at the time of confirmation of the plan.
S.Rep. No. 95-989, 95th Cong., 2d Sess. 68 (1978) U.S.Code Cong. & Admin.News 1978, pp. 5787, 5854 (emphasis added). The Senate version of Section 506(a) was accepted in the compromise bill submitted to both houses, again, with express statements by the managers of the intended effect:
Additionally a determination of what portion of an allowed claim is secured and what portion is unsecured is binding only for the purpose for which the determination is made. Thus determinations for purposes of adequate protection is [sic] not binding for purposes of “cram down” on confirmation in a case under chapter 11.
124 Cong.Rec. H11095 (daily ed. Sept. 28, 1978), S17411 (daily ed. Oct. 6,1978) (emphasis added). These indications of Congressional intent, reinforcing the language of Section 506(a), make it impossible to accept the single valuation approach. A determination of the value of a secured creditor’s interests for purposes of adequate protection cannot determine value for plan confirmation.
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2. Continuous valuation.
Inland Mortgage and Addison Court have argued that an alternative to the single value approach should be applied in determining the protec-tible interest of a creditor secured by both fixed collateral and its proceeds. Their approach, which can be referred to as “continuous valuation,” is based on the reasoning employed by most of the decisions that reject single valuation, including
In re Union Meeting Partners,
In re Union Meeting Partners,
Of course, it is possible that a creditor’s secured claim which is expanding under § 552(b) may become so large as to eat up any deficiency and call into play § 506(b). At that point, the creditor would become entitled to interest on its claim. Any rents collected beyond that ... would revert to the debtor.
Id.
Finally, the court performed a Section 506(a) bifurcation, for purposes of plan confirmation, in accord with this analysis. From the $6,800,000 property value, the court subtracted $235,000 in prior tax liens, to arrive at a net secured claim of about $6,565,000. The $1,442,000 in rents previously paid to the secured creditor were subtracted from the
unsecured
portion of the creditor’s claim, as the continuous valuation approach requires, to arrive at a net unsecured claim of about $1,357,000 (total claim of $9,364,000, less secured claim of $6,565,000, less net rents of $1,442,000).
The impact of the continuous valuation approach in a typical single-asset case is illustrated in the following chart, using the same parameters as in Chart 1. Here, the value of the secured claim is not fixed at the time of filing, but increases with each month’s net proceeds. The unsecured portion of the claim is correspondingly reduced, and ultimately, there is a surplus of collateral that can be used to pay interest and costs under Section 506(b). There are no funds available to the debtor, since all of the cash is needed to adequately protect the increasing secured claim and the creditor’s right to interest.
*778 Chart 2: Continuous Valuation Nonfluctuating Fixed Assets; Regular Cash Proceeds
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a. Effect of continuous valuation.
In sharp contrast to the single valuation approach, the effect of continuous valuation is to balance the bankruptcy process heavily in favor of the creditor secured by a Section 552(b) lien on proceeds. Indeed, in a single-asset case, unless the creditor is substantially oversecured, so that the debtor can pay interest and costs and still have funds left over, or unless the debtor has an outside source of funds, the creditor has a veto on the bankruptcy case from the outset. This is because, without the creditor’s consent, there will be no funds available for any of the administrative expenses that are required to keep the case alive. As noted earlier, cash collateral of a secured creditor cannot be used to pay administrative expenses unless the creditor’s interest is adequately protected.
In re 680 Fifth Avenue Associates,
*779
b. Difficulties with continuous valuation.
The principal argument made against the continuous valuation approach has already been noted: its critics contend that this approach conflicts with the rule of
Timbers
that underseeured creditors are not entitled to improve their position relative to other creditors during the pendency of the bankruptcy.
See, e.g., Reddington/Sunarrow,
i. Timing of adequate protection valuation.
Although the language and legislative history of Section 506(a), as noted above, require that valuation of a secured claim for purposes of confirmation take place in conjunction with the confirmation hearing, there is no similar directive as to when claims should be valued for adequate protection purposes. However, a number of courts have concluded that adequate protection is designed to safeguard the value of a creditor’s collateral at the time of the filing of the bankruptcy. For example, the district court in
In re Johnson,
The date the petition is filed and the bankruptcy case is commenced is the point where the secured creditor’s rights are first impacted by the bankruptcy and the tension between adequate protection of such rights and a meaningful chance at rehabilitation under Chapter 13 for the debtor begins. The logical point as of which to ascertain property interests that must be adequately protected throughout an ensuing Chapter 13 bankruptcy proceeding is the point where the bankruptcy begins — the date of filing.
(Citation omitted.) One of the decisions often cited in support of continuous valuation,
In re Landing Associates, Ltd.,
It might well be appropriate to value property as of the filing date in order to evaluate whether a creditor’s interest has been adequately protected. After all, the function of adequate protection is to maintain the value of the creditor’s interest in the property as of the filing date.
Cf. In re Delta Resources, Inc.,
ii. Fluctuating asset value. In addition to conflicting with judicial authority on the timing of adequate protection valuation, the continuous valuation approach creates highly questionable results when applied in a case where the property securing a claim fluctuates in value. Examples of such assets would include inventories of jewelry, which would fluctuate with the market price of precious metals and gems, and portfolios of common stocks or bonds. The traditional rule of adequate protection would only require a debtor to protect a creditor from a decline in the value of such collateral to a point below the value as of the filing of the bankruptcy. The following chart reflects the traditional approach to adequate protection, in a situation where assets initially worth $75 fluctuate between $60 and $110 during the course of the bankruptcy.
Chart 3: Traditional Adequate Protection Valuation Fluctuating Fixed Assets
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As shown in the chart, traditional adequate protection concepts require the debtor to make cash payments or supply replacement liens only to the extent, and for the periods, in which the value of the assets is lower that the creditor’s interest in the collateral at the time of filing.
Continuous valuation, in contrast, produces a “ratchet” effect, in which every increase in the asset value above the prior highest value requires adequate protection, producing the peculiar result shown in the next chart (using the same parameters as in Chart 3).
*781 Chart 4: Continuous Valuation Fluctuating Fixed Assets
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As this chart reflects, continuous valuation in bankruptcy dramatically enhances the rights of secured creditors, allowing them to demand the upside of any fluctuation in collateral value while being protected from any downside movements.
in. Fluctuating Net Proceeds. A similar problem with continuous valuation exists when fixed assets securing a claim remain stable, but produce fluctuating amounts of proceeds. In some months, a business may produce proceeds well in excess of operating costs, while in other months, its proceeds are less than what is required to maintain operations. The traditional approach to adequate protection only requires the debtor to provide new protection if the accumulated cash, together with the fixed assets, produces a value below what existed at the date of filing. The following chart illustrates this approach in the situation of a business that has a positive cash flow during the first six months in bankruptcy, negative cash flow for the next four months, and a break-even cash flow for the final two months.
*782 Chart 5: Traditional Adequate Protection Valuation Nonfluctuating Fixed Assets; Irregular Cash Proceeds
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Under this traditional approach, there is no need for adequate protection, because the total collateral package available to the creditor never falls below the level at the time of filing.
Continuous valuation, in contrast, uses the cash that comes into the business at each point in time to create a new, higher, secured claim. Then, if there is a cash shortfall in any month, the debtor must provide new adequate protection, on penalty of relief from stay. This predicament is shown in the next chart, using the same parameters as Chart 5.
*783 Chart 6: Continuous Valuation Nonfluctuating Fixed Assets; Irregular Cash Proceeds
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This approach again gives the secured creditor greater protection than it would have had, through foreclosure, in the absence of a bankruptcy.
iv. Excessive valuation expense.
The final difficulty with continuous valuation is the increased administrative burden that it would impose on bankruptcy estates. With traditional adequate protection valuation, there is no need to conduct formal appraisals of the assets securing a claim as long as the assets are acknowledged not to have declined from their value at the time the case was filed. Continuous valuation, in contrast, provides the secured creditor with an incentive to measure every slight increase in value, with the potential for an adequate protection demand in the event that there is ever a decrease from the new, higher level. The estate will always bear the cost of responding to new values claimed by a secured creditor, and, if the creditor’s claim ever becomes oversecured, it may have to bear the costs of the creditor’s appraisals as well. If such a system is not required by the Bankruptcy Code, it ought to be avoided. Indeed, one of the reasons for the general rule against post-petition interest on claims is precisely to avoid similar administrative costs.
Vanston Bondholders Protective Comm. v. Green,
Dual valuation.
The two methods suggested by the parties in the present ease for assessing the proteetible interest of a creditor secured by an assignment of rents— single valuation and continuous valuation— are both flawed, for the reasons set forth
*784
above. Each gives inadequate weight to the requirement of Section 506(a), reinforced by its legislative history, that valuation of secured claims for purposes of confirmation is a distinct process from earlier valuation for purposes of determining adequate protection. The single valuation approach errs by assuming that the value of a secured claim for adequate protection, at the beginning of the ease, constitutes the value of the claim at confirmation. The continuous valuation approach errs by assuming that, because changes in the value of collateral during bankruptcy should be considered for confirmation, these changes must also be considered for adequate protection. Rather than follow either of these approaches, the better course is to accept the suggestion of
Landing Associates,
Delinking adequate protection and confirmation valuations produces a system of dual valuation, like the one that many courts have employed in Chapter 13 cases.
In re Kennedy,
Applying dual valuation in the context of an assignment of rents in a Chapter 11 cases produces the following results:
(1) For purposes of adequate protection, the claim of the secured creditor is fixed as of the date of filing. Section 552(b) proceeds increase the collateral securing that claim, but do not increase the claim for purposes of adequate protection. Accordingly, if the underlying collateral is not declining in value or at risk of declining in value, the additional cash collateral may be used by the debtor to pay administrative expenses, as well as to maintain or improve the underlying collateral or to make payments on the creditor’s claim. However, any such expenditures require court authorization after notice and hearing. 11 U.S.C. § 363(e)(2). Thus, the secured creditor has the opportunity of objecting to any expenditures that it believes improperly reduce its collateral.
(2) At confirmation, the secured claim is revalued. The total claim is reduced by any payments made by the debtor, and the collateral securing the claim is reappraised. Any proceeds under Section 552(b) that have not been expended by the debtor, and are not necessary to pay expenses of preservation under Section 506(c), increase the amount of the secured claim. Any appreciation in the value of the underlying collateral also increases the secured claim.
(3) If the collateral package at the time of confirmation exceeds the amount of the creditor’s total prepetition claim, the creditor is entitled to interest and costs under Section 506(b) to the extent of the surplus.
This dual valuation approach is consistent with, if not required by, Section 506(a). Its impact on the bankruptcy process is weighted in favor of neither party. Debtors are likely to have the funds necessary to meet the administrative expenses of their bankruptcy, but they cannot reduce the creditor’s secured claim with funds accumulated through delay. The impact of the dual approach can also be illustrated graphically, using the same parameters as Charts 1 and 2. First, if no administrative expenses are paid from the cash collateral, the result at confirmation is the same as it would have been under continuous valuation:
*785 Nonlluctuatlng Fixed Assets: Chart 7: Dual Valuation Regular Cash Proceeds; No Administrative Expenses
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*786 Second, if administrative expenses are paid from the cash collateral, the secured claim is reduced, but never below the level of adequate protection:
Chart 8: Dual Valuation Nonfluctuating Fixed Assets; Regular Cash Proceeds; Administrative Expenses Paid
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In the present case, insufficient information has been provided to allow a determination whether the retainer sought by A & G may be paid from the accrued rents of the property. However, if the debtor can demonstrate that the property is not declining in value and is not at risk of declining in value, if there are accrued rents in excess of the proposed retainer, and if there is assurance that other administrative expenses are likely to be paid, then the retainer may well be appropriate.
Conclusion
Ruling on the pending motion will be continued until after a hearing to determine the appropriateness of the retainer sought to be paid, in conformity with the principles set forth above.
Notes
. The debtor's application to retain A & G makes it clear that a "security” retainer is intended, rather than a prepayment of fees: the firm intends to submit fee applications pursuant to Sections 330 and 331, with the retainer being applied pursuant to further orders of the court. See
In re McDonald Bros. Construction, Inc.,
. Section 363 places its restrictions on the use of estate properly by a "trustee,” but the restrictions are applicable to debtors in possession pursuant to Section 1107(a).
In re Wooten,
. "Cash collateral” is defined for purposes of Section 363 as “cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest.” 11 U.S.C. § 363(a). The three secured creditors in the present case claim to have an interest in the debtor’s rents pursuant to their assignment of rents. The debt- or does not dispute this claim, and, if the assignments of rents were properly recorded, it would appear that their claim to an interest in the rents is valid. See
In re Wheaton Oaks Office Partners Ltd.,
. Law review articles commenting on the issue, and discussing the conflicting case law, include Craig H. Averch et al.. The Treatment of Net Rents in Bankruptcy — Adequate Protection, Payment of Interest, Return of Collateral, or Reduction of Debt, 48 U.Miami L.Rev. 691 (1994); David G. Carlson, Adequate Protection Payments and the Surrender of Cash Collateral in Chapter II Reorganization, 15 Cardozo L.Rev. 1357 (1994); and Bonnie K. Donahue & W. David Edwards, The Treatment of Assignments of Rents in Bankruptcy: Emerging Issues Relating to Perfection, Cash Collateral, and Plan Confirmation, 48 Bus.Law. 633 (1993).
. Section 506(a) provides in pertinent part:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor's interest in the estate’s interest in such property ... and is an unsecured claim to the extent that the value of such creditor's interest ... is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.
.Section 506(c) provides:
The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.
. Section 552(b)(2), as amended by the Bankruptcy Reform Act of 1994, Pub.L. 103-394 effective October 22, 1994, provides in pertinent part:
Except as provided in sections 363, 506(c), 522, 544, 545, 547, and 548 of this tide, and notwithstanding section 546(b) of this title, if the debtor and an entity entered into a security agreement before the commencement of the case and if the security interest created by such security agreement extends to property of the debtor acquired before the commencement of the case and to amounts paid as rents of such property ..., then such security interest extends to such rents ... acquired by the estate after the commencement of the case to the extent provided in such security agreement, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise.
. Section 506(b) provides:
To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
. However, as noted in
Timbers,
the potential for such delay is substantially reduced by the requirement that relief from stay be granted under Section 362(d)(1) whenever there is not "a reasonable possibility of a successful reorganization within a reasonable time."
. Two other decisions cited by Inland Mortgage and Addison
Court
—Federal
National Mortgage Ass’n v. Dacon Bolingbrook Assocs.,
. Another alternative to single valuation holds that a bifurcation pursuant to Section 506(a) fixes the secured claim for purposes of allowance and adequate protection, but that valuations of collateral for purposes of allowing interest under Section 506(b) should take place throughout the case. Thus, as net proceeds come into the estate, they result in the fixed secured claim being ov-ersecured, so that interest (and contractual costs) must be paid on the claim. This approach is advocated in Craig H. Averch et al.,
The Treatment of Net Rents in Bankruptcy—Adequate
Prot
ection, Payment of Interest, Return of Collateral, or Reduction of Debt,
48 U.Miami L.Rev. 691 (1994), and appears to have been applied in
In re Vermont Investment Ltd. Partnership,
. The theory supporting this calculation of the unsecured claim is that the payment of rents to the secured creditor effected a "wash.” The rents increased the secured portion of the claim when they were received as collateral (in this case to a total of $8,007,000 — the $6,565,000 million real property value plus the $1,442,00 in rents), causing the unsecured portion of the claim to be reduced accordingly. The total claim of $9,364,000, less the increased secured claim of $8,007,000 resulted in an unsecured claim of about $1,357,000. The fact that the rents were actually paid to the secured creditor reduced the secured claim back to the value of the real estate, $6,565,000, but left the unsecured claim at $1,357,000.
. Similar considerations influenced the Court of Appeals in
Timbers
to reject claims of underse-cured creditors for payment of opportunity costs. “In many Chapter 11 cases ... the likely result
*779
of requiring periodic postpetition interest payments to undersecured creditors will be the immediate conversion to Chapter 7 — a result which seems inconsistent with the congressional policy favoring attempts at reorganization.”
In re Timbers of Inwood Forest Assoc., Ltd.,
. However, it is not difficult to see why critics of continuous valuation see this approach as contrary to Timbers. The value of any income-producing property is the discounted value of the stream of income it generates — its "net proceeds.” See Leslie K. Beckhart, No Intrinsic Value: The Failure of Traditional Real Estate Investment Methods to Value Income-Producing Property, 66 So.Cal.L.Rev. 2251, 2285-2288 (1993). By asking for market interest on this value to compensate for their delay in obtaining the property, the creditors in Timbers were thus asking for the equivalent of the net proceeds. Or, to see it in another way, the creditors in Timbers might have simply argued that they should be paid the net proceeds, since, but for the bankruptcy, they could have foreclosed on the collateral and realized the rents themselves.
. A number of bankruptcy decisions have held that a secured creditor whose collateral is declining in value is only entitled to receive adequate protection payments "prospectively from the date of the request."
See In re Kennedy,