Issue link: https://mbozikis.ufcontent.com/i/1422521
97 If the property to be sold is subject to a lien that secures an allowed claim, the holder of the claim may, unless the court orders otherwise, "credit bid" at the sale, offsetting the amount of its claim against the purchase price. 11 U.S.C. § 363(k). This is an important protection for a secured party whose collateral is being liquidated in a bankruptcy sale. The right to credit bid enables a lien holder to purchase assets without putting up any cash and retake the property when it believes that the price bid at the sale does not sufficiently reflect the value of the collateral. 49 If property is jointly owned, it may be sold if: (i) partition is impractical; (ii) benefit to the estate outweighs the detriment to the other party; (iii) sale of only the estate's undivided interest would bring in substantially less than sale of the entire property; and (iv) it is not property used in the production or provision of gas or electric power. 11 U.S.C. § 363(i). A co-owner of jointly-owned property has a right of first refusal, but if such right is not exercised, the trustee must deliver to the co-owner its appropriate share of the proceeds. 11 U.S.C. § 363(j). 3. Assumption and Rejection of Executory Contracts and Unexpired Leases Section 365 of the Bankruptcy Code provides the trustee or debtor-in-possession 50 with the authority to assume, assume and assign, or reject executory contracts and unexpired leases. The term "executory contract" is not defined in the Bankruptcy Code, but the prevailing definition of an executory contract, first 49 In addition to the right to credit bid in a sale undertaken outside of a plan of reorganization, Section 1129(b) also provides for this right where the plan contemplates a sale of assets and the secured creditors whose collateral is being sold are subject to "cramdown" under such plan. (For a discussion of cramdown, see Chapter VI.G.2.a. below.) The Supreme Court established that when a debtor's cramdown plan entails selling collateral free and clear of a creditor's liens, subject to Section 363(k), the creditor has the right to "credit bid" using its outstanding debt. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (2012). 50 For purposes of the discussion on Section 365 of the Bankruptcy Code, as discussed in Chapter I.A., references to a "trustee" also encompass the debtor-in-possession in a Chapter 11 case.