Bankruptcy Law Blog

Thursday, May 21, 2015

Article 9 Repo Sales Gaining Popularity

What are alternatives to Chapter 11 Bankruptcy?

Recently creditors’ seeking to dispose of the assets of a delinquent borrower through Article 9 of the Uniform Commercial Code instead of in Bankruptcy court has become a popular procedure.  To repossess encumbered assets and sell them under the UCC, a creditor only has to perform a lien search, notice the interested parties, and conduct the sale.  The process can take as little as thirty days, unlike sales through the bankruptcy code, which require court approval, include additional legal fees, and take at least sixty days to complete.  This method of collection is comparable to a foreclosure sale, although Article 9 of the UCC is not applicable to real estate.  A creditor whose loan is connected to specific collateral, such as a car loan, may repossess that property, provide notice to other parties, and sell it without court approval, if that loan is delinquent.  There are different means for repossession, but almost all of them involve less legal fees than a Chapter 11 Bankruptcy.

Often times, debtors will opt to use Article 9 of the UCC instead of filing bankruptcy, because it saves them time and money as well.  Scott Kay, Inc., a jewelry manufacturer chose to do it earlier this year.  In March of 2015, an Alabama furniture manufacturer that defaulted on its debts had its equipment seized and sold by the creditor.  The equipment went to a different manufacturing plant in the same town, which is now thriving.  In another individual case, the assets of a defunct company were purchase by a coalition of former employees who used the equipment purchased to restart the company and keep their jobs.  

There are many ways in which an Article 9 sale can be beneficial to a Bankruptcy action, but each case is different and only an attorney can help determine what the best course of action is for each individual case.  The experienced Mobile and Baldwin County, Alabama bankruptcy attorneys at Padgett & Robertson will assist you in determining the best course of action for your financial future.  Call (251) 342-0264 today to schedule an appointment.


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