Fifth Circuit Ruling Gives Commercial Lessees Likely Protection In Bankruptcy Court Free and Clear Asset Sales

The Fifth Circuit signaled that it would not approve in later cases a bankruptcy court asset sale of real property that summarily cuts off the rights of the debtor's lessees.

7 minute read April 01, 2022 at 12:13 AM

Michael L. Cook

Fifth Circuit Ruling Gives Commercial Lessees Likely Protection In Bankruptcy Court Free and Clear Asset Sales

A bankruptcy court gave "unnecessary and likely incorrect" reasoning to support its "excessively broad proposition that sales free and clear under [Bankruptcy Code ("Code")] Section 363 override, and essentially render nugatory, the critical lessee protections against a debtor-lessor under [Code] 365(h)," said the U.S. Court of Appeals for the Fifth Circuit on Feb. 16, 2022.

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