Chapter Eighteen. Use, Sale, or Lease of Property After reading this chapter, you will be able to: Describe the details of the actual liquidation process and common methodologies of liquidation, private sales and public auctions Define the concept of cash collateral and the limits upon its use Understand a sale “free and clear of liens” Describe the sale of joint tenancy or tenancy in common property

Ordinary Course of Business Normal everyday business transactions

Use, Sale, or Lease of Property The basic rule is that a trustee may use, sell, or lease property of the estate, other than in the ordinary course of business, only after notice and a hearing. This means that in a Chapter 7 liquidation, any use, sale or lease of estate property will require notice and a hearing because a liquidation is not conducted in the ordinary course of business. In a Chapter 11, 12, or 13 proceeding, only transactions not in the ordinary course of business will require prior court approval.

Capital and Noncapital Assets A capital asset is one that is used to operate the business, such as equipment or fixtures. A noncapital asset is, for example, the inventory of an operating business.

Cash Collateral Cash collateral is cash or, or its equivalent, in which a secured creditor may have an interest. Section 363(c) of the Bankruptcy Code restricts the use of cash collateral absent court approval.

Sales Requiring Prior Court Approval All Chapter 7 sales, except as in &2 Sales not in the ordinary course of business

Court Approval Not Required Chapter 9, 11, 12, or 13 sales in the ordinary course of business Chapter 7 sales in the ordinary course of business when a Chapter 7 trustee is authorized to operate

Sales Free and Clear of Liens-- Conditions Nonbankruptcy law permits Lienholders consent All liens will be paid in full Lien is in good-faith dispute Lienholder could be legally compelled to accept money satisfaction