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socrateaser, Attorney
Category: Bankruptcy Law
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Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Regarding Chapter 11 Bankruptcy, please identify case law relating

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Regarding Chapter 11 Bankruptcy, please identify case law relating to factoring of accounts receivable, and if the sale of accounts are represents a true sale, the accounts will not be part of the bankruptcy proceeding.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 8 years ago.

Nothing on point concerning receivables specifically, however:


In re Coleman, 426 F.3d 719 (4th Cir. 10/20/2005) (Debtor in possession has same powers as trustee and must avoid any secured interest that can be avoided under the Code, for the benefit of the bankruptcy estate).


If I may suggest, the big issue would be whether or not the factoring was an artifice to pull money out of the bankruptcy estate, and actually intended to "defraud, hinder or delay" the unsecured creditor's claims. This is a factual issue as much as anything else, and the closer the factoring gets to the date of filing of the bankruptcy petition, the more suspect the transaction becomes.


Note: I am reluctant to look for case law outside of the 4th Circuit, because it is not binding on a Virginia-based bankruptcy.


Hope this helps.


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