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Abstract

This article will focus on the interpretive struggle that the courts have encountered in making determinations of what constitutes adequate assurance of payment under section 366 and how this struggle might be eliminated so as to make compliance with the requirements of adequate assurance of payment less of a problem for the utility and bankrupt debtor. It is the thesis of this article that section 366 determinations of adequate assurance have resulted in interpretive confusion, leaving debtors and creditors with little guidance as to what criteria should be considered in negotiating an adequate assurance of payment. The recommended solution to this uncertainty and confusion as to what criteria would be most useful in section 366 determinations is an increase in judicial deference to state laws and regulations governing security deposit requirements of utilities (state-based deposit formulas). As will be discussed later, state-based deposit formulas are one of the more common criteria used by utility-creditors as evidence of adequate assurance of payment in section 366 cases. The courts, in the majority of these cases, have held that the deposit amounts based on these formulas are reasonable protection for the utility and debtor under section 366 ...

The first part of the article will present a general discussion of section 366 and its applicability, and the aforementioned interpretive issues that have been effectively resolved by the courts. In the second part of the article, there will be an analysis of the various judicial interpretations of the term "adequate assurance of payment" and the various criteria that the courts have considered in determining the reasonableness of the adequate assurance of payment provided. The third part will present an analysis of the case law considering the viability of state laws and regulations governing utility deposit requirements in section 366 determinations of adequate assurance of payment, and an argument favoring greater judicial deference to such state laws as a solution to the interpretative confusion that has amassed under case law in such determinations.

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