Establish ownership first
Inventory the assets and the legal entity that owns each one. Include receivables, inventory, machinery, IP, deposits, claims, and proceeds. Distinguish leased assets, customer property, consignments, and affiliate-owned assets from the company’s property.
Financial statements and possession do not resolve every ownership question. Examine contracts, title records, assignments, and relevant tracing. A sale process should not promise assets the seller cannot convey.
Separate attachment, perfection, and priority
A security interest’s enforceability against the debtor, effectiveness against third parties, and rank among competing interests involve distinct rules. State enactments of secured-transactions law and other applicable statutes govern the analysis.
Review the security agreement, collateral description, debtor identity, filings, possession or control, amendments, continuation statements, and any intercreditor agreement. Real property, deposit accounts, intellectual property, and other specialized collateral may require different steps.
Value collateral under the relevant standard
Section 506 supplies part of the bankruptcy framework for secured-claim treatment. The purpose of valuation and proposed use or disposition can matter. Continued-use value, orderly-sale proceeds, and auction proceeds should not be conflated.
Model sale costs, carrying costs, taxes, and disputed liens. A nominal equity cushion can disappear when the realization budget is included. Record assumptions and sensitivities before projecting an unsecured recovery.
Cash collateral and protection of interests
Section 363(a) defines cash collateral to include specified cash and equivalents in which another entity has an interest. Section 363(c)(2) requires consent or court authorization for its use. A bank balance therefore is not necessarily unrestricted working capital.
Adequate protection under § 361 may involve cash payments, replacement liens, or other relief within the statute. The proposal should match the interest being protected and the risks created by the proposed use.
The release and proceeds workstream
Before a workout or sale closes, reconcile debt amounts, lien releases, payoff conditions, proceeds allocation, and any continuing obligations. A UCC termination statement is not a substitute for understanding the secured obligation and agreed release.
In an ABC or receivership, identify the applicable state-law sale powers and any required lender consent or order. In bankruptcy, determine the actual statutory basis for the proposed sale and treatment of liens.