A 363 sale under the US Bankruptcy Code allows trustees to sell assets free and clear of liens. Here's how the process works for industrial equipment, machinery, and plant assets: from court filing through final settlement.

What is a 363 Sale?

Section 363 of the US Bankruptcy Code allows a bankruptcy trustee or debtor-in-possession to sell assets outside the ordinary course of business, free and clear of all liens, claims, and interests. For industrial equipment and plant assets, this is the most common mechanism for maximizing creditor recovery in Chapter 7 and Chapter 11 proceedings.

Why 363 Sales Maximize Recovery

The "free and clear" provision is the key. Buyers pay a premium for clean title. Without it, buyers discount heavily for lien uncertainty. A properly run 363 auction with a qualified industrial auctioneer consistently outperforms private sales or UCC Article 9 dispositions for large plant assets.

The 363 Sale Process Step by Step

Step 1: Trustee engages qualified auctioneer / liquidator
Step 2: Motion to sell filed with bankruptcy court (includes proposed sale procedures, notice requirements, overbid procedures)
Step 3: Notice served to all creditors and interested parties (21-day notice period standard)
Step 4: Stalking horse bid negotiated (provides a floor, triggers competitive process)
Step 5: Auction conducted. Qualified bidders compete under court-approved overbid procedures
Step 6: Results presented to court for approval (sale hearing)
Step 7: Court enters order approving sale
Step 8: Assets transferred to buyer free and clear
Step 9: Proceeds distributed per the priority waterfall (secured creditors first, then administrative, then unsecured)

What Trustees Look for in an Industrial Auctioneer

AMEA/USPAP appraisal capability (court requires valuation), track record with court-supervised sales, ability to produce court-required documentation (settlement statements, buyer lists, proceeds accounting), no conflicts with secured creditors, national buyer reach.

Common 363 Sale Questions

What is a stalking horse bid?

A pre-negotiated purchase agreement with an initial bidder that sets a minimum price floor and triggers the competitive auction. The stalking horse typically receives break-up fee protection (1–3% of bid) if outbid.

Can secured lenders credit bid?

Yes, under 363(k), a secured creditor may credit bid up to the full amount of its allowed secured claim, effectively "buying" the collateral for the value of its debt without paying cash.

How long does a 363 sale take?

From motion filing to court approval typically 45–90 days in an active Chapter 11. Chapter 7 trustees can move faster with court approval.

What happens to equipment leases in a 363 sale?

Leased equipment is not property of the estate and cannot be sold under 363 unless the trustee assumes the lease. Secured equipment (purchase money security interests) IS property of the estate but subject to the secured lender's rights.

KD Auctions and 363 Sales

We work with Chapter 7 and Chapter 11 trustees, receivers, and secured lenders on court-supervised industrial equipment dispositions. Full documentation for court submission, AMEA-certified appraisals, and settlement accounting that meets trustee standards. Contact us for a confidential consultation on your next court-supervised liquidation.

How a 363 Bankruptcy Sale Works: Trustee's Complete Guide to Industrial Asset Disposition