Legal Question in Bankruptcy in Utah

Acquiring a Business in Bankruptcy

Want to buy a dental practice in bankruptcy. Have questions about Chapter 7. If there is a disagreement between creditors (ie Landlord vs secured Creditor) what happens? Can a Landlord ''lock up'' the assets? Who has to spend the money on legal fees? What kind of an ''order'' is needed for a secured creditor to take assets if landlord claims they are now his because they are bolted down (ie real property)? What if several secured creditors have a ''blanket lien'' on the business? If I take over the business and operate for a period of time, aside from the fact of the equipment that is secured (I know I have to get new or negotiate with creditors) are there any residual liens. Meaning can a creditor come back to me in the future and say that they had a blanket lien over the entire business (patient records, goodwill, other intagibles) with previous owner and that lien carried over to me? What constitutes a clean brake from previous owner to myself? If Chapter 7 is filed do assets remain with individual or business until some creditor tries to exercise their right to them or do they all immediately go under the control of some entity/person appointed in the bankruptcy? Can creditors make collection calls once Chapter 7 is filed?


Asked on 8/12/04, 1:24 pm

1 Answer from Attorneys
Alvin Lundgren Alvin R. Lundgren, L.C.

Re: Acquiring a Business in Bankruptcy

In order to purchase a property out of bankruptcy the purchaser needs to enter into an agreement with the Bankruptcy Trustee. The Trustee is the "owner" of the assets in the bankruptcy. If an agreement is reached, an order is presented to the judge for approval. If approved, the sale can go through. Whether the property is free of liens is a question of law, depending on specific facts and whether the putative lien holders have properly secured their interest. The judge will make a final determination of any lien interests.

Creditors cannot attempt to collect against a party in bankruptcy. If you attempt to assert a lien against the property, your priority is determined by the judge. You will have to file a legal action in bankruptcy court to pursue your rights (at your cost). You should act quickly to preserve your rights.

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Answered on 8/12/04, 3:40 pm


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