Rethinking Reclamation as a Trade Creditor Remedy

Goods sellers had previously relied on reclamation rights when customers were unable or unwilling to pay for goods delivered on credit terms. The enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) limited the reclamation rights of goods sellers by curtailing the available remedies. There have been post-BAPCPA court decisions that have denied relief on reclamation claims.

As a result, creditors asserting reclamation claims have continued to face significant obstacles in either securing the return of their goods or receiving a distribution on account of their claim. However, a few courts have ruled in favor of reclamation creditors. As a result, despite the unfavorable holdings, creditors seeking to increase their recoveries should continue to assert their reclamation rights. This article provides an overview of the issues reclamation creditors have litigated and how they have fared since BAPCPA’s passage.