7 CFR §1980.475

1. (a)It is the lender's responsibility to protect the guaranteed loan debt and all the collateral securing it in bankruptcy proceedings. These responsibilities include but are not limited to the following:
   1. (1)The lender will file a proof of claim where necessary and all the necessary papers and pleadings concerning the case.
   2. (2)The lender will attend and where necessary participate in meetings of the creditors and all court proceedings.
   3. (3)The lender, whose collateral is subject to being used by the trustee in bankruptcy, will immediately seek adequate protection of the collateral.
   4. (4)Where appropriate, the lender should seek involuntary conversion of a pending Chapter 11 case to a liquidating proceeding under Chapter 7 or under Section 1123(b) (4) or seek dismissal of the proceedings.
   5. (5)When permitted by the Bankruptcy Code, the lender will request modification of any plan of reorganization whenever it appears that additional recoveries are likely.
   6. (6)Rural Development will be kept adequately and regularly informed in writing of all aspects of the proceedings.
2. (b)In a Chapter 11 reorganization, if an independent appraisal of collateral is necessary in Rural Development's opinion, Rural Development and the lender will share such appraisal fee equally.
3. (c)Expenses on Chapter 11 reorganization, liquidating Chapter 11 or Chapter 7 (unless the lender is directly handling the liquidation) cases are not to be deducted from the collateral proceeds.
4. (d)Estimated loss payments. See paragraph XVI of Form RD 449-35.