4. Suspension of Payments

Suspension of Payments in Rehabilitation Proceedings

Rehabilitation proceedings commence upon the court's issuance of the Commencement Order, which declares the debtor to be under rehabilitation and sets forth the proceedings' legal effects¹. In the course of rehabilitation, the court may, either on motion or motu proprio, terminate, modify, or set conditions for the continuance of the suspension of payment, or relieve a particular claim from its coverage². Such action requires a showing that a creditor lacks adequate protection over the property securing its claim, or that the value of a claim secured by a lien on property not necessary for the debtor's rehabilitation exceeds the fair market value of that property².

For these purposes, a creditor is deemed to lack adequate protection when:

• The debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the encumbered property insured²;
• The debtor fails or refuses to take commercially reasonable steps to maintain the property²; or
• The property has depreciated to an extent that the creditor is undersecured².

Upon a showing of lack of adequate protection, the court must direct the debtor or the rehabilitation receiver to arrange for the property's insurance or maintenance, or to make payments or provide additional or replacement security to ensure the obligation is fully secured². If such arrangements are not feasible, the court may modify the Stay Order to allow the secured creditor to enforce its security claim². Finally, upon confirmation of the Rehabilitation Plan, claims that arise after the approval of the Plan and are not otherwise treated by it are not subject to any Suspension Order³.