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Free And Clear Sale Under Section 363 Of The Bankruptcy Code Prevents Successor Liability, Matthew Bopp

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code allows a debtor to sell its assets free and clear of any interest in such property, pursuant to section 363(f) of the Bankruptcy Code. Section 363(f) is used to allow the trustee to sell assets not in the ordinary course of business and to allow purchasers to buy assets without the fear of liability. The Bankruptcy Code does not define the term “interest.” Thus, in interpreting section 363(f), a court must view interest in property expansively. Using section 363(f), courts have extinguished several types of claims and interest in property including: possessory interests, employment related claims, …

City’S Retention Of Impounded Vehicle Not Violation Of Automatic Stay, Alexis Zobeideh

Bankruptcy Research Library

(Excerpt)

Upon the filing of a petition under title 11 of the United States Code (the “Bankruptcy Code”), creditors and other parties in interest are generally automatically stayed from taking any action against a debtor or property of the estate. The estate includes “all legal or equitable interests of the debtor in property as the commencement of the case,” with some exceptions. The automatic stay is “one of the most important protections and powerful tools available to a debtor in a bankruptcy.”

It is well established that a creditor cannot take affirmative steps against a debtor or estate property. Prior …

Constraints On The Breadth Of A Bankruptcy Trustee’S Power To Demand A Turnover Of Assets, Timothy Diprisco

Bankruptcy Research Library

(Excerpt)

Title 11 of the United States Code (the “Bankruptcy Code”) empowers bankruptcy trustees to compel entities to turn over property to the bankruptcy estate. Property subject to the turnover provision includes “all legal and equitable interests of the debtor in property at the commencement of the case.” Although the Bankruptcy Code is federal law, property interests are still defined by state law. Occasionally, bankruptcy trustees claim property as part of the estate that courts later deem is beyond the breadth of their authority.

This memorandum examines the extent of a bankruptcy trustee’s power to compel turnover of assets. Part …

Exploring The Scope Of The Property Requirement Of Section 109(A) In Chapter 11 And 15 Cases, Rasha El Mouatassim Bih

Bankruptcy Research Library

(Excerpt)

Section 109 of title 11 of the United States Code (the “Bankruptcy Code”) provides that “only a person that resides or has a domicile, a place of business, or property in the United States . . . may be a debtor.” In In re Barnet, the United States Court of Appeals for the Second Circuit held that debtor eligibility requirements of section 109 apply to a debtor in recognition proceedings under chapter 15. If a debtor does not have a domicile or place of business in the United States, as is often the case with foreign debtors, then …

Fraudulent Transfer Provision Of The Bankruptcy Code Defined More Narrowly Than Similar Provisions In Other Statutes, Yaakov Seff

Bankruptcy Research Library

(Excerpt)

The fraudulent conveyance provision of the Bankruptcy Code, (“the Code”), Section 548, is an “elemental and ancient provision of debtor-creditor relations.” It provides that “[t]he trustee may avoid any transfer ... of an interest of the debtor in property ... that was made ... within two years before the date of the filing of the petition . . .” where the transfer involved actual or constructive fraud.

But the ability to avoid fraudulent transfers is not limited to the bankruptcy context; parallel provisions are found in several areas of the federal legislation. For instance, there is a fraudulent transfer …

Conflict In The Bankruptcy Code: Ramification Of A Trustee’S 363(F) Right To Sell Property “Free And Clear” On The Lessee’S 365(H) Right To Retain Property, Aaron Leaf

Bankruptcy Research Library

(Excerpt)

Section 363(f) of title 11 of the United States Code (the “Bankruptcy Code”) allows a trustee to sell property “free and clear of any interest in such property” that a third party might have if certain conditions are met. Section 365(h) of the Bankruptcy Code allows the lessee of a rejected lease to either retain the property with all rights appurtenant to the estate, or treat such lease as terminated and sue for damages. Courts are split on if these sections of the Bankruptcy Code are compatible. The majority of courts have found these sections are not compatible, and …

S-Corp And Qsub Tax Status As Property Of The Bankruptcy Estate, Ryan Jennings

Bankruptcy Research Library

(Excerpt)

Under the Internal Revenue Code, a corporation can elect to be an “S” Corporation (“S-Corp”) for federal income tax purposes. Electing for S-Corp status will make the corporation a pass through entity, meaning that the corporation itself will not have any tax benefits or liability. Instead, the company’s income will be passed on to it shareholders, who will have to report it on their personal tax returns. Similarly, an S-Corp that owns a subsidiary corporation can elect to treat it as qualified subchapter S subsidiary (“QSub”). A QSub is also a pass through entity that passes its tax benefits …

Does The “Free And Clear” Language In An Order Approving A Sale Pursuant To Section 363(F) Of The Bankruptcy Code Bar A Successor Liability Claim?, Stephanie Y. Lin

Bankruptcy Research Library

(Excerpt)

Section 363(f) of the Bankruptcy Code was enacted to empower debtors to maximize the value of their bankruptcy estate for the benefit of creditors. Because the assets sold in a sale under section 363(f) (a “363 Sale”) transfer “free and clear” of “any interest in such property,” a purchaser would be more likely to pay a higher price for the assets. In turn, a higher price paid for the assets results in more available resources to distribute among the debtor’s creditors. If a claim is considered an “interest in such property” and the sale order provides that the sale …

Whether Section 522(B)(3) Of The Bankruptcy Code Contains An Implied Residency Requirement For Determining Which Exemption Scheme Applies, Christopher Mccune

Bankruptcy Research Library

(Excerpt)

Filing a bankruptcy petition creates a bankruptcy estate consisting of all the debtor’s legal or equitable interests in property, plus any proceeds generated from the disposition of property of the estate. Once a debtor’s asset becomes property of the estate, all the debtor’s rights in that property are extinguished, unless the property is “exempted” under section 522 of the Bankruptcy Code or is otherwise abandoned back to the debtor. Accordingly, while creditors are entitled to seek reimbursement in the rest of the bankruptcy estate, the debtor may retain his or her interest in exempted property.

Thus, section 522 of …

In Re Whitehall Jewelers Holdings, Inc., Jonathan Borst

Bankruptcy Research Library

(Excerpt)

In In re Whitehall Jewelers Holdings, Inc., No. 08-11261(KG), 2008 WL 2951974 (Bankr. D. Del. July 28, 2008), the court held against Whitehall Jewelers Holdings, Inc. (“Debtors”), in favor of approximately 124 consignment vendors (“Consignment Vendors”), where Debtors sought an order permitting the “free and clear” sale of all of their assets and inventory, including consigned goods from Consignment Vendors. See id. at *1–2. In order to develop a full understanding of the court’s holding, it is necessary to understand its statutory context, specifically sections 363 and 541 of the Bankruptcy Code, as well as Federal Rule of …

Effect Of Debtor’S Pre-Petition Election To Apply Tax Refund Toward Liability For Petition Year In Determination Of Property Of The Estate, Timothy Fox

Bankruptcy Research Library

(Excerpt)

Establishing what property of the debtor will pass into the bankruptcy estate is critical to effectuating the dual purposes of the Bankruptcy Code: to grant the debtor a fresh start and to divide assets of the estate equitably among creditors. In a chapter 7 proceeding, this threshold determination divides the debtor’s assets into those that the debtor will retain and those that will be liquidated to satisfy creditors’ claims.

In determining what is property of the estate, an issue arises when before filing for bankruptcy, the debtor files a return for a pre-petition tax year and elects to apply …

Clear Channel Outdoor, Inc. V. Knupfer, Thomas Scappaticci

Bankruptcy Research Library

(Excerpt)

An important and traditional power afforded by the Bankruptcy Code to debtors and trustees is the power to sell encumbered property free and clear of any liens or encumbrances. See G COLLIER ON BANKRUPTCY, App. Pt. 44, at 44-529 (Alan N. Resnick et al. eds., 15th ed. rev. 2006). One way in which this power is given to debtors and trustees is through Section 363(f)(3) of the Bankruptcy Code, which provides a mechanism for property to be sold free and clear of any liens. See 11 U.S.C. § 363(f)(3) (2006). Yet, the application of Section 363(f)(3) is not entirely …