Liquidating trust

If the plan fails to sufficiently preserve the claim, the claim may be subject to an attack on the basis of subject matter jurisdiction.

The degree of specificity required in identifying preserved claims varies from jurisdiction to jurisdiction.

Liquidating trusts can be effective tools to wind down any business enterprise, including debtors in Chapter 11 bankruptcy cases and entities that dissolve outside of bankruptcy. To that end, in a Chapter 11 case, a debtor’s exclusive right to file a plan is limited to 120 days (subject to extensions for cause), but once a plan is confirmed, the bankruptcy estate ceases to exist and the debtor loses its status as debtor in possession, including its authority to act as a bankruptcy trustee and pursue estate claims.

To find out more, Lawyer Monthly hears from Ashley B. It states that a plan may provide for the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such claim or interest.Do the beneficiaries have rights to control the trustee’s actions?Liquidating trusts generally either grant the trustee a high degree of discretion or require the trustee to obtain approval of the committee on any decisions above a certain minimal level of materiality. Even where the agreement grants the trustee wide discretion, are there any actions that require committee approval?Although this may not always result in disaster, it is nearly certain to result in difficulties down the road — and highly likely to result in objections at plan confirmation.Worse yet is that in defending against the objection it may become clear to the objectors and the court that the author never bothered to consider the importance of the provisions contained in (or omitted from) the agreement.

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