this post was submitted on 11 Dec 2024
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The estate has a duty to maximize the value of the liquidation, and pay back creditors as best it can. Specifically to settle the debts.
While a creditor can't dictate the value of the estate, they can offer to forgive debt, which is the same for the purposes of the estate.
If the cancelled debt would have been worth more than the cash, then the creditors would be rightfully furious if the state instead sold the asset for less cash and paid them that way.
If you owe me $50k, and I tell you your watch is worth $5k to me, and instead you sell it for $250 and give me that while declaring bankruptcy so I don't get anything else, that's a terrible outcome for me, and great for you if you sold the watch to your friend who then gave it back to you in exchange for $250 later.