Section 363 Has Become An Alternative That Poses Problems

Law360, New York (March 8, 2016, 10:08 AM EST) -- Section 363 of the Bankruptcy Code was created to help debtors shed assets rapidly, before they fall in value absent a quick sale. Think a supermarket with perishables (such as bananas) on the shelves.

But with Chapter 11 often too onerous for small companies — particularly retailers — Section 363 has become an alternative that poses significant problems. Put another way, except for very large companies — think mega-retailers — Chapter 11 commonly leads to liquidation.

It’s important to note that debtors aren’t the only drivers here. Liquidators actually compete at auctions for the rights to run going-out-of business sales and...

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