11 U.S.C. § 545 — Statutory liens

Page 168 TITLE 11—BANKRUPTCY § 545 plicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title. (2) Paragraph (1) shall not apply to a transfer of a charitable contribution (as that term is de- fined in section 548(d)(3)) that is not covered under section 548(a)(1)(B), by reason of section 548(a)(2). Any claim by any person to recover a transferred contribution described in the pre- ceding sentence under Federal or State law in a Federal or State court shall be preempted by the commencement of the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2596; Pub. L. 98–353, title III, § 459, July 10, 1984, 98 Stat. 377; Pub. L. 105–183, § 3(b), June 19, 1998, 112 Stat. 518.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 544(a)(3) modifies similar provisions con- tained in the House bill and Senate amendment so as not to require a creditor to perform the impossible in order to perfect his interest. Both the lien creditor test in section 544(a)(1), and the bona fide purchaser test in section 544(a)(3) should not require a transferee to per- fect a transfer against an entity with respect to which applicable law does not permit perfection. The avoiding powers under section 544(a)(1), (2), and (3) are new. In particular, section 544(a)(1) overrules Pacific Finance Corp. v. Edwards, 309 F.2d 224 (9th Cir. 1962), and In re Federals, Inc., 553 F.2d 509 (6th Cir. 1977), insofar as those cases held that the trustee did not have the sta- tus of a creditor who extended credit immediately prior to the commencement of the case. The House amendment deletes section 544(c) of the House bill. SENATE REPORT NO. 95–989 Subsection (a) is the ‘‘strong arm clause’’ of current law, now found in Bankruptcy Act § 70c [section 110(c) of former title 11]. It gives the trustee the rights of a creditor on a simple contract with a judicial lien on the property of the debtor as of the date of the petition; of a creditor with a writ of execution against the property of the debtor unsatisfied as of the date of the petition; and a bona fide purchaser of the real property of the debtor as of the date of the petition. ‘‘Simple contract’’ as used here is derived from Bankruptcy Act § 60a(4) [section 96(a)(4) of former title 11]. The third status, that of a bona fide purchaser of real property, is new. Subsection (b) is derived from current section 70e [section 110(e) of former title 11]. It gives the trustee the rights of actual unsecured creditors under applica- ble law to void transfers. It follows Moore v. Bay, 284 U.S. 4 (1931), and overrules those cases that hold sec- tion 70e gives the trustee the rights of secured credi- tors. Editorial Notes AMENDMENTS 1998—Subsec. (b). Pub. L. 105–183 designated existing provisions as par. (1), substituted ‘‘Except as provided in paragraph (2), the trustee’’ for ‘‘The trustee’’, and added par. (2). 1984—Subsec. (a)(1). Pub. L. 98–353, § 459(1), inserted ‘‘such’’ after ‘‘obtained’’. Subsec. (a)(2). Pub. L. 98–353, § 459(2), substituted ‘‘; or’’ for ‘‘; and’’. Subsec. (a)(3). Pub. L. 98–353, § 459(3), inserted ‘‘, other than fixtures,’’ after ‘‘property’’, and ‘‘and has per- fected such transfer’’ after ‘‘purchaser’’ the second place it appeared. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–183, § 5, June 19, 1998, 112 Stat. 518, pro- vided that: ‘‘This Act [amending this section and sec- tions 546, 548, 707, and 1325 of this title and enacting provisions set out as notes under this section and sec- tion 101 of this title] and the amendments made by this Act shall apply to any case brought under an applicable provision of title 11, United States Code, that is pend- ing or commenced on or after the date of enactment of this Act [June 19, 1998].’’ EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. CONSTRUCTION OF 1998 AMENDMENT Pub. L. 105–183, § 6, June 19, 1998, 112 Stat. 519, pro- vided that: ‘‘Nothing in the amendments made by this Act [amending this section and sections 546, 548, 707, and 1325 of this title] is intended to limit the applica- bility of the Religious Freedom Restoration Act of 1993 (42 U.S.C. 2002bb [2000bb] et seq.).’’ § 545. Statutory liens The trustee may avoid the fixing of a statu- tory lien on property of the debtor to the extent that such lien— (1) first becomes effective against the debt- or— (A) when a case under this title concerning the debtor is commenced; (B) when an insolvency proceeding other than under this title concerning the debtor is commenced; (C) when a custodian is appointed or au- thorized to take or takes possession; (D) when the debtor becomes insolvent; (E) when the debtor’s financial condition fails to meet a specified standard; or (F) at the time of an execution against property of the debtor levied at the instance of an entity other than the holder of such statutory lien; (2) is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time of the commencement of the case, whether or not such a purchaser ex- ists, except in any case in which a purchaser is a purchaser described in section 6323 of the In- ternal Revenue Code of 1986, or in any other similar provision of State or local law; (3) is for rent; or (4) is a lien of distress for rent. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2597; Pub. L. 98–353, title III, § 460, July 10, 1984, 98 Stat. 377; Pub. L. 109–8, title VII, § 711, Apr. 20, 2005, 119 Stat. 127.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 545 of the House amendment modifies similar provisions contained in the House bill and Senate amendment to make clear that a statutory lien may be avoided under section 545 only to the extent the lien violates the perfection standards of section 545. Thus a Federal tax lien is invalid under section 545(2) with re- spect to property specified in sections 6323(b) and (c) of Page 169 TITLE 11—BANKRUPTCY § 546 the Internal Revenue Code of 1954 [title 26]. As a result of this modification, section 545(b) of the Senate amendment is deleted as unnecessary. Statutory liens: The House amendment retains the provision of section 545(2) of the House bill giving the trustee in a bankruptcy case the same power which a bona fide purchaser has to take over certain kinds of personal property despite the existence of a tax lien covering that property. The amendment thus retains present law, and deletes section 545(b) of the Senate amendment which would have no longer allowed the trustee to step into the shoes of a bona fide purchaser for this purpose. SENATE REPORT NO. 95–989 This section permits the trustee to avoid the fixing of certain statutory liens. It is derived from subsections 67b and 67c of present law [section 107(b) and (c) of former title 11]. Liens that first become effective on the bankruptcy or insolvency of the debtor are voidable by the trustee. Liens that are not perfected or enforce- able on the date of the petition against a bona fide pur- chaser are voidable. If a transferee is able to perfect under section 546(a) and that perfection relates back to an earlier date, then in spite of the filing of the bank- ruptcy petition, the trustee would not be able to defeat the lien, because the lien would be perfected and en- forceable against a bona fide purchaser that purchased the property on the date of the filing of the petition. Finally, a lien for rent or of distress for rent is void- able, whether the lien is a statutory lien or a common law lien of distress for rent. See proposed 11 U.S.C. 101(37); Bankruptcy Act § 67(c)(1)(C). The trustee may avoid a lien under this section even if the lien has been enforced by sale before the commencement of the case. To that extent, Bankruptcy Act § 67c(5) is not followed. Subsection (b) limits the trustee’s power to avoid tax liens under Federal, state, or local law. For example, under § 6323 of the Internal Revenue Code [Title 26]. Once public notice of a tax lien has been filed, the Gov- ernment is generally entitled to priority over subse- quent lienholders. However, certain purchasers who ac- quire an interest in certain specific kinds of personal property will take free of an existing filed tax lien at- taching to such property. Among the specific kinds of personal property which a purchaser can acquire free of an existing tax lien (unless the buyer knows of the ex- istence of the lien) are stocks and securities, motor ve- hicles, inventory, and certain household goods. Under the present Bankruptcy Act (§ 67(c)(1)) [section 107(c)(1) of former title 11], the trustee may be viewed as a bona fide purchaser, so that he can take over any such des- ignated items free of tax liens even if the tax authority has perfected its lien. However, the reasons for ena- bling a bona fide purchaser to take these kinds of as- sets free of an unfiled tax lien, that is, to encourage free movement of these assets in general commerce, do not apply to a trustee in a title 11 case, who is not in the same position as an ordinary bona fide purchaser as to such property. The bill accordingly adds a new sub- section (b) to sec. 545 providing, in effect, that a trustee in bankruptcy does not have the right under this sec- tion to take otherwise specially treated items of per- sonal property free of a tax lien filed before the filing of the petition. Editorial Notes REFERENCES IN TEXT Section 6323 of the Internal Revenue Code of 1986, re- ferred to in par. (2), is classified to section 6323 of Title 26, Internal Revenue Code. AMENDMENTS 2005—Par. (2). Pub. L. 109–8 inserted before semicolon at end ‘‘, except in any case in which a purchaser is a purchaser described in section 6323 of the Internal Rev- enue Code of 1986, or in any other similar provision of State or local law’’. 1984—Par. (1)(A). Pub. L. 98–353, § 460(1), struck out ‘‘is’’ after ‘‘is’’. Par. (1)(C). Pub. L. 98–353, § 460(2), substituted ‘‘ap- pointed or authorized to take’’ for ‘‘apponted’’. Par. (2). Pub. L. 98–353, § 460(3), substituted ‘‘at the time of the commencement of the case’’ for ‘‘on the date of the filing of the petition’’ in two places. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. § 546. Limitations on avoiding powers (a) An action or proceeding under section 544, 545, 547, 548, or 553 of this title may not be com- menced after the earlier of— (1) the later of— (A) 2 years after the entry of the order for relief; or (B) 1 year after the appointment or elec- tion of the first trustee under section 702, 1104, 1163, 1202, or 1302 of this title if such ap- pointment or such election occurs before the expiration of the period specified in subpara- graph (A); or (2) the time the case is closed or dismissed. (b)(1) The rights and powers of a trustee under sections 544, 545, and 549 of this title are subject to any generally applicable law that— (A) permits perfection of an interest in prop- erty to be effective against an entity that ac- quires rights in such property before the date of perfection; or (B) provides for the maintenance or continu- ation of perfection of an interest in property to be effective against an entity that acquires rights in such property before the date on which action is taken to effect such mainte- nance or continuation. (2) If— (A) a law described in paragraph (1) requires seizure of such property or commencement of an action to accomplish such perfection, or maintenance or continuation of perfection of an interest in property; and (B) such property has not been seized or such an action has not been commenced before the date of the filing of the petition; such interest in such property shall be per- fected, or perfection of such interest shall be maintained or continued, by giving notice with- in the time fixed by such law for such seizure or such commencement. (c)(1) Except as provided in subsection (d) of this section and in section 507(c), and subject to the prior rights of a holder of a security interest in such goods or the proceeds thereof, the rights and powers of the trustee under sections 544(a), 545, 547, and 549 are subject to the right of a sell- er of goods that has sold goods to the debtor, in