Sale Free and Clear

“A sale under Section 363 that takes advantage of the provisions of Section 363(f) allowing the property to be sold “free and clear of any interest in such property” under specified conditions including, most importantly, in the case of a lien, when “the price at which such property is to be sold is greater than the aggregate value of all liens on such property.” Any liens then attach to the proceeds of the sale.

There is controversy over whether the Code requires that the sale price be for the entire amount of the liens even if the property is of less “value” than the aggregate amount of the liens.

Diabolical Question: Is “amount” a synonym for “value” in any thesaurus published in the Upper World? Isn’t the undersecured lender fully protected by its right to credit bid the entire amount of its debt?

Some bankruptcy courts have stretched the notion of “interests in such property” to include unsecured claims, such as tort claims and other claims that might be asserted against the buyer on the theory of successor liability, and have purported to bar the future assertion of such claims against both the property sold and the buyer.”

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 the meaning of sale free and clear, read Not Necessarily Free and Clear: Purchasing Real Estate Property in a Section 363 Sale and Section 363 Sale: Free and Clear of Claims That Are Backed By Strong Public Policies.

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