In many bankruptcy cases, courts permit debtors in possession and trustees to “sell” avoidance actions to third parties as part of a Section 363 sale or pursuant to a Chapter 11 plan. However, the purchaser of those actions will not pursue them. Such purchasers are acquiring these actions along with other assets just to avoid suing vendors and other parties in interest, thereby protecting the business they are purchasing.

Courts have limited standing to pursue those actions to parties who can be classified as a “representative of the estate” under Section 1123 of the Bankruptcy Code, a factor that has depressed the development of avoidance action portfolios as an independent asset class available for sale.