What are the Pros and Cons of selling my pre-petition claim in bankruptcy?

Answer: In a sale, the rights held by the original claim-holder are transferred to the purchaser of the claim...even if the actual purchase price was substantially discounted from the face value of the claim [which it usually is].

From the seller perspective, selling a claim present an opportunity to recoup at least part of its pre-petition balance. Due to the uncertainty associated with the size and timing of payment by a bankrupt debtor, many creditors choose to sell their claim for immediate cash rather than hold onto it for a possibly better return in the future.

As with any other contract, creditors should read the terms of sale carefully. Make certain you understand exactly when you will be paid and how much you will receive. Make an informed decision about whether to hold or to sell your pre-petition debt based on your own independent evaluation of the likely recovery in bankruptcy.

Disclaimer: The information provided in this Bulletin is not legal advice and is not a substitute for legal advise. Readers are encouraged to contact an attorney to discuss any questions that may arise after reading this Bulletin with their attorney to clarify any of the issues raised.