Liquidating property

In order to sell assets free and clear of liens, claims, and encumbrances under section 363(b) of the Bankruptcy Code, the debtor must also establish through evidence that it meets one of the five requirements under section 363(f) of the Bankruptcy Code.

Under section 363(f), a debtor can sell its property free and clear of interests if: If the debtor is unable to satisfy one of these five requirements, the sale free and clear of liens and encumbrances will be denied.

If substantially all of the assets of a debtor can be sold under section 363(b), without prior confirmation of a Chapter 11 plan, then the sale can be accomplished much earlier in the Chapter 11 process, resulting in significantly lower legal and accounting fees, and a much quicker sale.

This is the process favored by secured lenders to liquidate collateral through a Chapter 11 sale process.

The alternative to section 363 sales in Chapter 11 bankruptcy cases is the sale of assets in a plan of reorganization or plan of liquidation under sections 1123(a)(5)(D) and 1141(c) of the Bankruptcy Code.

Section 1123(a), which governs the contents of a Chapter 11 plan states: “a plan shall- ...

The term “pay the freight” may have different meanings depending on which court and judge you are in front of.

Once a court authorizes the sale, creditors have very limited opportunity for redress because mootness operates to protect good faith buyers and foreclose appeals.

Sales in a plan entail lengthy confirmation processes, but are viewed as protecting creditors’ rights and protecting the sanctity of the bankruptcy proceedings.

The Company’s sales have deteriorated and it is in default of certain financial covenants contained in the loan documents with the Bank.

The orderly liquidation value of the Company’s assets (the Bank’s collateral) is sufficient to pay the Bank off in full, but little or nothing will be left over to pay junior priority secured creditors and unsecured creditors. The buyer is interested in purchasing the Company’s assets, but wants to protect itself against successor liability and fraudulent transfer claims.

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