Buying a Chapter 11 Business Question

[Kenneth Woodall]

I am approaching a multi unit that has been approved for chapter 11. Is the current owner allowed to accept an offer lower than the total debts?

Simplified example:

10 unit property with $1mil in debt. $800K is from a secured loan. $200K are from various vendors (unsecured). It was approved for Chapter 11. I want to offer $750K. 

Is the current owner allowed to sell for $750K, or does the sale need to cover the entire cost of the debts? What's the process of getting approval for the sale (ie: does each debtor get a vote, does the bankruptcy judge need to approve it, etc.?)

[Ronald Allen Barney]

A sale in chapter 11 doesn't necessarily have to always cover all costs as market conditions can be a factor, but the debtor-in-possession is a fiduciary to the creditors in all cases and will be directed by the U.S. Trustee in all cases to do what is in the interest of the creditors.  Creditors would have to be convinced that a sale at a certain price is more advantageous by virtue usually of time to cash over a dragged out sale when there is negative cash flow.  In that case the DIP would have to establish that the property can't command a higher amount in a reasonable time period.