Reclamation

“A seller’s right to recover possession of goods sold to an insolvent buyer under the Uniform Commercial Code or common law. The right of reclamation survives, in modified form, in the debtor/purchaser’s bankruptcy filing.

Under most state laws the demand for reclamation must be in writing and made within 10 to 20 days of the debtor’s receipt of the goods. The seller’s state-law right of reclamation continues in bankruptcy, as modified under Section 546(c), and the seller may reclaim goods received by the debtor while the debtor was insolvent, if received by the debtor within 45 days before the date of the bankruptcy filing. The seller, however, must demand reclamation in writing no later than 45 days after the debtor received the goods (or no later than 20 days after the bankruptcy filing if the 45-day period expires after the filing of the bankruptcy case). The right of reclamation is subordinate to a prior security interest in the goods sought to be reclaimed. Sellers of goods whose reclamation rights are denied may still be able to assert an administrative claim under Section 503(b)(9) for goods delivered within 20 days of the filing of the bankruptcy case.”

This definition is courtesy of our friends at Polsinelli who publish the Devil’s Dictionary of Bankruptcy Terms. You can access the Devil’s Dictionary here.

For more information about reclamation, read Trade Tips #5 and #6: How do you assert your reclamation rights? and What are §503(b)(9) claims? You may also be interested in reading Reclamation of Reclamation Claims by the Delaware Bankruptcy Court in Reichhold Holdings and Dealing with Corporate Distress 11: How to Protect Your Claim In & Out of Bankruptcy.