UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION - DETROIT

IN THE MATTER OF: COLLINS & AIKMAN CORPORATION, Debtor. _________________________________/ Case No. 05-55927-SWR Honorable STEVEN W. RHODES Chapter 11

BRIEF IN SUPPORT OF THE MOTION FOR ORDER REQUIRING DEBTOR TO ASSUME OR REJECT LEASES ON THE EQUIPMENT ON BEHALF OF TOYOTA MOTOR CREDIT CORPORATION

The Debtor in Possession (hereinafter referred to as the Debtor) entered into a Stipulated Order for Adequate Protection with Toyota Motor Credit Corporation (TMCC) on August 15, 2005 (Docket # 942). Pursuant to the Stipulated Order for Adequate Protection, the Debtor was required to make payments for the Equipment, as defined in the Motion, held by Toyota. The Debtor has failed to make the required payments pursuant to the Stipulated Order for Adequate Protection as evidenced by the Notice of Default filed by Toyota. Pursuant to 11 U.S.C. 365, the Debtor cannot assume the lease until curing or providing adequate assurance that it will cure the default and providing adequate assurance of future performance under the lease. The Debtor has failed to do so. 11 U.S.C. 362(d)(2) allows a debtor in possession a reasonable time within which to determine whether assumption or rejection of an executory contract would be beneficial to an effective reorganization. However, as the Court noted in In re Adelphia Communications Corp., 291 B.R. 293; 2003 Bankr. LEXIS 286 (Bankr. S.D. NY 2003), the breathing space afforded to the debtor for the assumption or rejection of a lease is not without limits. This same section provides that the Court on request of party to a lease may order a debtor in possession to determine within a specified period of time whether to accept or reject a lease. In determining what constitutes a reasonable time for a debtor to assume or reject an unexpired lease, the Courts have analyzed several factors including: (1) the damage the non-debtor will suffer beyond the compensation available under the Bankruptcy Code; (2) the importance of the contract to the debtors business and reorganization; (3) whether the debtor has had sufficient time to appraise its financial situation and the potential value of its assets in formulating a plan; and (4) whether

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exclusivity has terminated. In re Rebel Rents, Inc., 291 B.R. 520; 2003 Bankr. LEXIS 550 (C.D. CA 2003) The Debtor has failed to remit adequate protection payments to Toyota and continues to use the Equipment. The value of the Equipment continues to depreciate on a daily basis. The continued depreciation in the absence of adequate protection payments causes irreparable harm and damage to Toyota. Therefore, the first factor points to requiring assumption or rejection before confirmation of the Debtors Plan. The Equipment at issue is not the sole asset of the Debtor and there is no evidence that the lease is essential to the debtors business and reorganization. The approximate 158 remaining forklifts and related equipment are scattered among the Debtors many plants. Pursuant to the recent Motion to Reject Leases of Nonresidential Real Property, it appears that the Debtor will no longer need at least 5 of the units of Equipment. Without contrary evidence from the Debtor, the second factor also suggests early assumption or rejection is warranted. The Debtor filed its Petition for Chapter 11 relief on May 17, 2005 and has had sufficient time to appraise its financial situation and potential value of its assets. The Debtor submitted its strategic plan on August 31, 2005 to some of the interested parties. However, TMCC has not seen this plan. The Debtors exclusivity period was to expire on September 15, 2005, but has been extended. The Court has continually indicated to the Debtor that there is a need for prompt analysis and decisions. Requiring early assumption or rejection supports the Courts process. As the Court held in In re Rebel, the Debtors cannot continue to maintain freedom to assume or reject its leases . . . without paying for its use of the vehicles. This state of affairs allows the Debtors to have its cake and eat it too. Id. citing Theatre Holdings Corp., 681 F.2d at 105 (2d Cir. 1982). The Court in In re Adelphia also noted additional factors releveant to the analysis including (1) the balance of hurt to the litigants; (2) the debtors failure or ability to satisfy postpetition obligations and (3) the safeguards afforded to the litigants. The Debtor has failed to remit adequate protection payments to Toyota. The funding challenges faced by the Debtor suggests that the Equipment may not be maintained. Furthermore, the Debtor may not be able to fund operations after September 30, 2005. This tips the balance of hurt in favor of Toyota. If the Debtor is unable to fund operations after this date, then it is likely going to reject the lease and delaying the decision only keeps Toyota in limbo as the value of its collateral decreases. The

failure of the Debtor to remit adequate protection payments pursuant to the Stipulated Order for Adequate Protection and its inability to fund operations after September 30, 2005 is a clear indication of the Debtors failure to satisfy post-petition obligations. Finally, an analysis of the third factor makes it clear that there are not adequate safeguards afforded to Toyota. Toyota is suffering irreparable harm as the Debtor continues to use the Equipment without remitting prepetition default payments and post-petition adequate protection payments. CONCLUSION The Code allows a Debtor in Possession a reasonable time within which to determine whether to accept or reject a lease. The factors utilized by the Courts in determining what constitutes a reasonable time suggests that the Debtor has had sufficient time to decide whether to accept or reject the Equipment Lease. The Debtor has failed to adhere to the Courts process by failing to comply with the Stipulated Order for Adequate Protection. The Debtor is likely to reject the lease as it may be unable to fund operations after September 30, 2005 and delaying the decision only keeps Toyota in limbo as the value of its collateral decreases. The Debtor has defaulted on both its pre-petition and post-petition obligations to Toyota. If the Debtor is given additional time, the Equipment will continue to depreciate and will result in irreparable harm to Toyota. The Equipment is not the sole asset of the Debtor and is not essential to the Debtors business and reorganization.

Therefore, the Court should require the Debtor to either assume or reject the Equipment Lease within 15 days after entry of the Courts Order. Respectfully submitted; KILPATRICK & ASSOCIATES, P.C.

/s/Leonora K. Baughman RICHARDO I. KILPATRICK (P35275) LEONORA K. BAUGHMAN (P33534) MARLA A. ZAIN (P62141) 903 North Opdyke, Suite C Auburn Hills, MI 48307 (248) 377 - 0700

Attorneys for Creditor, Toyota Motor Credit Corporation

Dated: September 14, 2005