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Debtors May Benefit from ' 363 Protections Post-Confirmation
Large corporate Chapter 11 debtors often realize value by divesting assets under ' 363 of the Bankruptcy Code as part of their development and negotiation of a Chapter 11 plan pursuant to which the proceeds of such sales will be distributed. When a debtor's ability to propose a plan of reorganization outpaces its sale efforts, there may be pressure to confirm the plan before the asset sales are completed. In such circumstances, bankruptcy courts have preserved the debtor's ability to dispose of assets pursuant to ' 363 of the Bankruptcy Code following confirmation and even the effectiveness of a Chapter 11 plan.
It is easy to understand why debtors and purchasers would want to preserve the estate's ability to sell assets pursuant to ' 363 following confirmation of a Chapter 11 plan. Section 363 offers numerous benefits that are attractive to debtors and purchasers. Under ' 363(f), assets can be sold free and clear of interests ' presumably including interests existing as of the date of the order approving the sale or the closing of the sale. Appeals of orders authorizing the good-faith sale of property may be mooted under ' 363(m). And the time required to complete a sale pursuant to ' 363 could be significantly shorter than the time required to solicit a plan, which otherwise could be required if the assets to be sold are material to plan recoveries. In some instances, the debtor may even be able to obtain an injunction prohibiting creditors from pursuing claims related to the assets against the purchaser.
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