• Unsecured Creditor Carve-outs: Chapter 11 Misery Makes Strange Bedfellows
  • October 26, 2016 | Author: David H. Conaway
  • Law Firm: Shumaker, Loop & Kendrick, LLP - Charlotte Office
  • Companies that sell goods or extend credit to customers expect to be paid. When customers become insolvent, or file for Chapter 11 protection, those expectations are no longer realistic. Yet, there are a number of “creditor remedies” that can be utilized to maximize recovery from the insolvent customer. This article addresses one such “remedy”: a carve-out from the pre-petition secured lender. At its essence, a carve-out is a transfer of cash or other value from the lender to unsecured creditors in exchange for a dismissal or waiver of claims held by creditors and/or support of the lender’s objectives in the Chapter 11 case (often a quick Section 363 sale).