Under a common Chapter 11 scenario, a debtor and its prepetition lender agree to the filing of a Chapter 11 proceeding with the goal of selling the lender's collateral (either to a third party or to the lender) pursuant to 11 U.S.C.
Debtors Cannot Sell Unsecured Creditor's Collateral
Under Section 363(f) of the Bankruptcy Code, a debtor may sell property free and clear of a third-party's liens, claims and encumbrances only if that party "could be compelled, in a legal or equitable proceeding, to accept a money satisfaction" of that party's interest in the property. However, in a recent case, the judge was faced with a relatively rare scenario.
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