Marshalling of Assets

Last Updated: Jun 7, 2019

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The marshalling of assets is a re-distribution of assets of an insolvent debtor in order to obtain a fair distribution of the remaining debtor assets to all creditors. In a bankruptcy court the judge can marshal assets related to a secured lender if several conditions exist. Marshaling could cause the judge to conclude that a lender is over-secured or has received collateral outside of the lending specialty to which the lender is engaged in. Principal items that may be marshaled include over-secured positions and securing collateral outside of the collateral for which financing was provided. For example, an equipment leasing company may file appropriate liens on accounts receivable and can wait the appropriate 90 days to perfect the filing on said receivables. The equipment loan may be backed up with appraisals that show reasonable coverage. A judge could marshal the assets and deny the secured position, designating the excess collateral in the receivables to other secured or unsecured creditors through a marshalling of assets.