The “twin goals” of most bankruptcy proceedings involve the “maximization” of return to creditors and the “prompt and efficient administration of the estate.” See Hoseman v. Weinschneider, 322 F.3d 468, 475 (7th Cir. 2003). To facilitate these goals, the Bankruptcy Code permits, and arguably encourages, the sale of estate property—under certain conditions—“free and clear of any interest” held by any party other than the estate. The effect of this right, contained in Section 363(f) of the Code, is to facilitate the expeditious transfer of property in exchange for the maximum amount of cash. Ironically, as a result of the nearly continuous expansion of what constitutes a removable “interest,” Section 363(f) has transformed bankruptcy courts from a reorganization forum to also being a highly efficient auction house.  

So what happens to creditors with unsecured interests relating to the property that a debtor or trustee wishes to sell free and clear? Do their rights survive against the purchaser of the assets? Almost certainly not.

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