§ 9.9.8.7.2 Sale of Encumbered Property Under a Plan.

• Jurisdiction: Arizona

§ 9.9.8.7.2 Sale of Encumbered Property Under a Plan. Encumbered property also can be sold under a plan. 11 U.S.C. § 1129(b)(2)(A)(ii). The collateral can be sold free and clear of liens subject to 11 U.S.C. § 363(k), which preserves the creditor’s right to credit bid. As with a sale outside of a plan under § 363(f) , a sale under a plan must permit the secured creditor to credit bid its debt under § 363(k). 11 U.S.C. § 1129(b)(2)(A)(ii) ; RadLAX Gateway Hotel, LLCAmalgamated Bank, __ U.S. __, 132 S. Ct. 2065 (2012) (plan proponent could not negate secured creditor’s credit bid rights at sale under a plan by purporting to give the creditor the “indubitabe equivalent” of its claim under
§ 1129(b)(2)(A)(iii)). If the creditor is not the prevailing bidder, its lien attaches to the proceeds. The creditor may be paid immediately from the sale proceeds or receive deferred cash payments or the “indubitable equivalent.” 11 U.S.C. §§ 1129(b)(2)(A)(i), (iii).

Collateral also can be sold outside of a plan pursuant to § 363(f) . See In re PW, LLC, 391 B.R. 25 (9th Cir. BAP 2008) (limited authority to sell under § 363(f) ). There may be significant differences in selling under a plan. The most important distinction is probably the lack of the requirement of § 363(f)(3) that the sale price exceed the value of the liens unless the secured creditor consents. This provision may be an anomaly, because even outside of a plan, the secured creditor is protected by the right to credit bid under § 363(k).

A sale under a plan also may avoid other restrictions. If the debtor can establish that replacement liens constitute the “indubitable equivalent” of the secured creditor’s lien, the property can be subdivided and sold in parcels over the secured party’s objection...