Section 363 of the Bankruptcy Code permits a debtor to sell substantially all of its assets outside of a plan of reorganization. “Sale cases” have become more prevalent in recent years and courts have increasingly relaxed the standards under which 363 sales are approved. The United States Court of Appeals for the Third Circuit recently issued an opinion, in In re ICL Holding Co., 802 F.3d 547 (3d Cir. 2015), that provides yet another path for debtors and secured creditors to utilize the Section 363 sale process to cleanse assets while enhancing the possibility that unsecured creditors may get a return on account of their claims in an otherwise hopeless situation.

In ICL Holding, the Third Circuit held that an asset purchaser’s payments into segregated accounts for the benefit of general unsecured creditors and professionals, made in connection with the purchase of all of the debtor’s assets, are not property of the estate or available for distribution to creditors. The court upheld the bankruptcy court’s prior orders that permitted unsecured creditors to receive a recovery and provided for the professionals to be paid in full despite the fact that a $24 million administrative claim went unpaid.

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