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- Title
THE DECLINE IN VALUE FORMULATION: HOW COURTS SHOULD APPROACH STATE BULK SALE PROVISIONS IN BANKRUPTCY.
- Authors
CHECK, ANTHONY
- Abstract
Bulk sale provisions give state departments a unique power that distinguishes them from the traditional creditor. In light of the special nature of the interests derived from bulk sale provisions, courts should recognize such interests to be protectable by § 363(e), even if traditional bankruptcy procedures would value that interest at $0. In lieu of blindly protecting the interests of state departments or senior creditors, courts should meet somewhere closer in the middle of each party's interests. In reaching this middle ground, to assess the degree to which this protection should extend, the burden should be on the state department to prove that the stripping away of its interest resulted in that interest declining in value. To prove such a fact, a state department must show that it would have recovered value from its interest, notwithstanding the fact that the interest was stripped away. Courts should place a value on such an interest that is commensurate to the decline in value of that interest, provided the state department has proven the decline in value. The recognition of such an interest as protectable serves to avoid litigation about how courts should recognize such an interest. Furthermore, it will allow parties to approach a bulk sale without having to worry about dealing with inconsistent courts that oftentimes unduly favor state departments over individual creditors, and vice-versa. By clearing up such confusion, buyers, sellers, creditors, and state departments will be more likely to negotiate with each other before the purchase occurs, allowing all parties to ensure their interests are well represented. Accordingly, courts should adopt a "decline in value ''formulation, provided in dicta of Illinois Department of Revenue v. Hanmi Bank, to determine what value to place on interests deriving from bulk sale provisions.
- Subjects
BULK sales; DEBTOR &; creditor; INTEREST (Finance); UNITED States. Dept. of State; FRAUDULENT conveyances
- Publication
Emory Bankruptcy Developments Journal, 2020, Vol 36, Issue 1, p259
- ISSN
0890-7862
- Publication type
Article