Are Reclamation Claims Still Economically Viable?

Law360, New York (October 5, 2016, 4:22 PM EDT) -- Since the amendment of Bankruptcy Code section 546(c) in 2005, many courts have held that a creditor's reclamation rights embodied under the Uniform Commercial Code ("UCC") have little economic viability in bankruptcy because there is almost always a senior secured lender with a blanket lien on substantially all of the debtors' assets, including inventory. As a result, many creditors do not assert reclamation claims, thinking they are economically worthless. A recent decision by the bankruptcy court in Delaware requires a rethinking on the viability of a creditor's reclamation claim in certain circumstances. Thus, the reclamation claim may not be lost, and consideration should be given to promptly sending a debtor a reclamation demand immediately upon learning of a bankruptcy filing....

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