A brief look at ABCs and Section 363 sales

On behalf of Macdonald Fernandez LLP posted in business and commercial bankruptcy on Wednesday, January 20, 2016.

Along with complexities and challenges of termination of a business or reorganization through Chapter 11 bankruptcy come opportunities to solve vexing financial and logistical problems. Liquidating or selling assets during a wind-down or during a bankruptcy is often necessary for smooth business operations to go on. Assignments for the benefit of creditors (ABCs) as an alternative to bankruptcy and section 363 sales in Chapter 11 bankruptcy are two ways that many business owners can proceed efficiently in the face of financial difficulties.

When the goal is an out-of-court method of winding down a business and liquidating assets efficiently, an ABC may be the best course of action. Businesses en route to termination can initiate an ABC, choosing their own assignees. These businesses can manage the process of termination through ABCs. An ABC allows for careful planning and selection of an assignee with the right blend of knowledge and experience to meet the company's unique circumstances. Quite a few companies conclude that an ABC, rather than bankruptcy, is the least damaging way to handle financial decline.

On the other hand, a business may determine that Chapter 11 bankruptcy is the right solution to a business's debt problems. Businesses choosing Chapter 11 bankruptcy may or may not expect to stay in business both during and after a bankruptcy. In either case, section 363 sales (as defined in 11 USC § 363(c)(1), can be an effective way for a business to disperse assets while moving through the bankruptcy process. Section 363 sales enable businesses to use, sell or lease pre-petition property without court approval during bankruptcy.

Macdonald Fernandez has a great deal of experience helping businesses decide on and implement financial solutions such as ABCs and section 363 sales in Chapter 11 bankruptcy.

Source: http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics, accessed Jan. 14, 2016

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