Chapter 11 liquidating trust
When drafting a plan and liquidating trust agreement, parties should ensure that the applicable jurisdictional prerequisites are met.
Liquidating trusts created under bankruptcy plans often vest their trustees with authority to prosecute avoidance and related actions against the creditors and third parties. Bayard’s Bankruptcy Group has long provided services to debtors, official committees of unsecured creditors and equity holders, trustees, purchasers and lenders in bankruptcy cases.Additional considerations include retaining bankruptcy court jurisdiction in the plan and trust agreement so that a liquidating trustee can seek court approval of certain actions and decisions made on behalf of the trust.An oversight committee is often utilized as well to oversee the liquidating trustee’s certain decisions and actions.These tasks may not justify the salaries being paid to the management team, which may wish to move on to new challenges.These considerations may tip the scales in favor of setting up a liquidation vehicle and bringing in an administrator experienced with winding down operations.
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By establishing a liquidating trust pursuant to section 1123(b)(3) in a confirmed plan of reorganization or liquidation, a debtor can transfer causes of action and other assets to a trust, for future liquidation and distribution to the debtor’s creditors, and avoid delaying plan confirmation.