Chapter VII Conclusion

• Jurisdiction: United States

Chapter VII Conclusion

Credit bidding in bankruptcy was once a fairly straightforward concept: Absent "cause," a creditor with a perfected lien in the debtor's property was entitled to bid the amount of its debt in a sale of its collateral by the debtor. "Cause," for the most part, was limited to cases involving extreme misconduct by the secured creditor or a legitimate challenge to the secured creditor's secured claim. In recent years, however, credit bidding has become one of the more hotly debated topics in bankruptcy law. Bankruptcy court decisions in Fisker and Free Lance-Star generated a great deal of discussion, and a circuit court split in Philadelphia Newspapers, Pacific Lumber and RadLAX, regarding whether a secured creditor must be afforded the right to credit bid in a sale of a debtor's assets under a plan, went all the way to the U.S. Supreme Court before finally being resolved.

Bankruptcy law has evolved tremendously in recent years. It is often stated that the fundamental goals of chapter 11 include rehabilitating the debtor and maximizing the value of estate assets for the benefit of all creditors. These goals were generally furthered in chapter 11 by a process that allowed a commercial enterprise to continue to operate its...