RadioShack filed for Chapter 11 bankruptcy in Delaware bankruptcy court in February, seeking a court-supervised sale of $1.2 billion in assets. Included in the sale is a database of customer information from about 1,700 stores regarding RadioShack’s 117 million customers. RadioShack has sought a sale of certain IP assets under the Bankruptcy Code, 11 U.S.C. 363. Any sale outside the normal course of business requires court approval and is governed by section 363, which is often referred to as a “363 sale.”

A 363 sale is a powerful tool for a debtor seeking to rapidly unwind. Most importantly, in a 363 sale, the assets are sold “free and clear” of any other creditor’s interests in the property. Such a sale can cut off theories of successor liability, liens, or leaseholds. This can greatly increase the sale value of a debtor’s property, which helps its creditors, but also dramatically affects the rights of any particular creditor with a special interest in that property. Section 363 is such a useful tool that many bankruptcy cases are now resolved by a 363 sale of a debtor’s assets rather than a traditional reorganization or liquidation process.

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