CHAPTER 11 OPERATIONS

IV. RECLAMATION RIGHTS

Pre-BAPCPA, Code § 546(c) preserved credit sellers' 10-day reclamation rights under Uniform Commercial Code § 2-702. It did so by limiting the trustee's avoiding powers under §§ 544(a), 545, 547 and 549 to the extent of the right of a seller, who has sold goods to the debtor in ordinary course of seller's business, to reclaim such goods under state or common law if the debtor received the goods while insolvent and the seller makes written demand on the debtor within 10 days after the debtor's receipt of the goods, or, if such 10-day period has not expired as of the bankruptcy filing, within 20 days of the debtor's receipt of the good.

In addition to preserving the seller's state law rights, the pre-BAPCPA Code

imposed additional requirements on a seller making a reclamation claim. Accordingly,

§ 546(c) required that a seller establish:

1. that the seller has a state or common law right to reclaim the subject

goods. A seller's state laws rights often will be defined by Uniform Commercial Code § 2

-702, which generally requires a seller seeking reclamation prove that:

the debtor has ceased to pay its debts in the ordinary course;

the seller was unaware of the debtor's insolvency;

the seller demanded reclamation within ten days of the debtor's receipt of the goods;

the debtor still has possession of the goods; and

the goods are not subject to the claims of a buyer in the ordinary course, other good faith purchaser, or lien creditor.

2. the debtor's insolvency under the Code. Section 546(c) uses the

term "insolvent," which is defined in § 101(32), and therefore may differ from the U.C.C. definition.