Auction of the Assets of a Debtor in a Bankruptcy

The U.S. Bankruptcy (See Insolvency.) Insolvency Under the Balance Sheet definition of insolvent in the U.S. Bankruptcy Code, a debtor is insolvent when the value of a debtor's assets is exceeded by the debtor's liabilities. .) Insolvenc Under the Balance Sheet A financial statement listing the assets, liabilities and owner's equity of a business entity as of a specific date. definition of insolvent in the U.S. Bankruptcy Code, a debtor is insolvent when the value of a debtor's assets is exceeded by the debtor's liabilities. y.) Code permits certain assets of the estate to be liquidated without court order if none of the parties Individuals involved in a sales transaction. In domestic sales: seller and buyer. In international sales: exporter and importer. In shipping: shipper and consignee. In letters of credit: beneficiary (seller) and applicant (buyer). exporter The person or company that sells or arranges to transport goods out of a country. and importer. In shipping: shipper Indemnity given by the beneficiary of a letter of credit to the negotiating bank to induce payment despite any discrepancies that may exist in the documents. and consignee An individual or company to whom cargo is shipped or consigned. . In letters of credit: beneficiary The person or company due payment in the letter of credit. Usually the exporter (seller). (seller) and applicant The party (generally buyer/importer) for whose account a letter of credit is established. (buyer). exporte The person or company that sells or arranges to transport goods out of a country. r and importer. In shipping: shippe Indemnity Compensation paid for damage or loss sustained or anticipated. given by the beneficiary of a letter of credit to the negotiating bank After the seller presents the required documents to this bank for review, it will notify the issuing bank that terms of letter of credit have been met. issuing ban Also known as the opening bank The account party's bank that issues or opens the credit. . It issues its commitment to the seller in the form of a letter of credit. k that terms of letter of credit have been met. to induce payment despite any discrepancies that may exist in the documents. r and consigne An individual or company to whom cargo is shipped or consigned. e. In letters of credit: beneficiar The person or company due payment in the letter of credit. Usually the exporter (seller). y (seller) and applican The party (generally buyer/importer) for whose account a letter of credit A financing instrument issued by a bank in favor of an exporter that substitutes the bank's creditworthiness for that of the importer. instrumen A right to the payment of money such as agency notes, commercial paper The unsecured promissory notes of large, financially sound corporations. , T-Bills, certificates of deposit (CD's), banker's acceptances and repurchase agreements. t issued by a bank in favor of an exporter that substitutes the bank's creditworthiness for that of the importer. is established. t (buyer). in interest Compensation for the use of money. objects. (Note: The U.S. bankruptcy code normally requires court approval for selling any assets, including assets to be sold at auction.)

The Code requires the trustee A person who takes possession of a debtor's assets in a bankruptcy proceeding and liquidates them to pay creditors. Appointed by the bankruptcy judge unless the district has a U.S. Trustee. to give notice to all creditors of an intended sale or other disposition of property of the estate. Usually the trustee will give at least 10 days notice of the sale of real property Land with all its buildings and legal interests. . Unless a party in interest, such as a secured creditor A person, business or governmental agency with a claim against a debtor or debtor's business. claim A right to payment or other equitable remedy in the event of a breach of contract. against a debtor or debtor's business. clai A right to payment or other equitable remedy Relates to the judicial means or court procedures by which legal and equitable rights are enforced. in the event of a breach of contract. m against a debtor or debtor's business. , files an objection to the proposed sale and requests a hearing, the trustee will proceed with the sale as outlined in the notice.

One recent development involves the use of Internet auction sites to sell assets of bankrupt companies. On-line auctions allow anyone with Internet access to participate in the auction process, theoretically increasing the amount raised from the sale of the debtor's assets. Another advantage of online auctions is that the auction can run over an extended period of time - also increasing the possibility of maximizing recovery to the bankrupt company's creditors.

Edited by Michael Dennis, author of "Credit and Collection Handbook" available at the NACM Bookstore.