11 U.S.C. § 1110
11 U.S.C. § 1110
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTSSection 1110 of the House amendment adopts an identical provision contained in the House bill without modifications contained in the Senate amendment. This section protects a limited class of financiers of aircraft and vessels and is intended to be narrowly construed to prevent secured parties or lessors from gaining the protection of the section unless the interest of such lessor or secured party is explicitly enumerated therein. It should be emphasized that under section 1110(a) a debtor in possession or trustee is given 60 days after the order for relief in a case under chapter 11, to have an opportunity to comply with the provisions of section 1110(a).During this time the automatic stay will apply and may not be lifted prior to the expiration of the 60-day period. Under section 1110(b), the debtor and secured party or lessor are given an opportunity to extend the 60-day period, but no right to reduce the period is intended. It should additionally be noted that under section 1110(a) the trustee or debtor in possession is not required to assume the executory contract or unexpired lease under section 1110; rather, if the trustee or debtor in possession complies with the requirements of section 1110(a), the trustee or debtor in possession is entitled to retain the aircraft or vessels subject to the normal requirements of section 365. The discussion regarding aircraft and vessels likewise applies with respect to railroad rolling stock in a railroad reorganization under section 1168.
SENATE REPORT NO. 95-989This section, to a large degree, preserves the protection given lessors and conditional vendors of aircraft to a certificated air carrier or of vessels to a certificated water carrier under section 116(5) and 116(6) of present Chapter X [section 516(5) and (6) of former title 11]. It is modified to conform with the consolidation of Chapters X and XI [chapters 10 and 11 of former title 11] and with the new chapter 11 generally. It is also modified to give the trustee in a reorganization case an opportunity to continue in possession of the equipment in question by curing defaults and by making the required lease or purchase payments. This removes the absolute veto power over a reorganization that lessors and conditional vendors have under present law, while entitling them to protection of their investment.The section overrides the automatic stay or any power of the court to enjoin taking of possession of certain leased, conditionally sold, or liened equipment, unless, the trustee agrees to perform the debtor's obligations and cures all prior defaults (other than defaults under ipso facto or bankruptcy clauses) within 60 days after the order for relief. The trustee and the equipment financer are permitted to extend the 60-day period by agreement. During the first 60 days, the automatic stay will apply to prevent foreclosure unless the creditor gets relief from the stay.The effect of this section will be the same if the debtor has granted the security interest to the financer or if the debtor is leasing equipment from a financer that has leveraged the lease and leased the equipment subject to a security interest of a third party.
EDITORIAL NOTES
AMENDMENTS2006-Subsec. (a)(3)(A)(ii). Pub. L. 109-304 substituted "vessel documented under chapter 121 of title 46" for "documented vessel (as defined in section 30101(1) of title 46)".2000- Pub. L. 106-181 amended section catchline and text generally, substituting present provisions consisting of subsecs. (a) to (d) for former subsecs. (a) to (c) which contained somewhat similar provisions.1994- Pub. L. 103-394 amended section generally. Prior to amendment, section read as follows: "(a) The right of a secured party with a purchase-money equipment security interest in, or of a lessor or conditional vendor of, whether as trustee or otherwise, aircraft, aircraft engines, propellers, appliances, or spare parts, as defined in section 40102(a) of title 49, or vessels of the United States, as defined in section 30101 of title 46, that are subject to a purchase-money equipment security interest granted by, leased to, or conditionally sold to, a debtor that is an air carrier operating under a certificate of convenience and necessity issued by the Secretary of Transportation, or a water carrier that holds a certificate of public convenience and necessity or permit issued by the Interstate Commerce Commission, as the case may be, to take possession of such equipment in compliance with the provisions of a purchase-money equipment security agreement, lease, or conditional sale contract, as the case may be, is not affected by section 362 or 363 of this title or by any power of the court to enjoin such taking of possession, unless-"(1) before 60 days after the date of the order for relief under this chapter, the trustee, subject to the court's approval, agrees to perform all obligations of the debtor that become due on or after such date under such security agreement, lease, or conditional sale contract, as the case may be; and"(2) any default, other than a default of a kind specified in section 365(b)(2) of this title, under such security agreement, lease, or conditional sale contract, as the case may be-"(A) that occurred before such date is cured before the expiration of such 60-day period; and"(B) that occurs after such date is cured before the later of-"(i) 30 days after the date of such default; and"(ii) the expiration of such 60-day period."(b) The trustee and the secured party, lessor, or conditional vendor, as the case may be, whose right to take possession is protected under subsection (a) of this section may agree, subject to the court's approval, to extend the 60-day period specified in subsection (a)(1) of this section."Subsec. (a). Pub. L. 103-272 substituted "section 40102(a) of title 49" for "section 101 of the Federal Aviation Act of 1958 ( 49 U.S.C. 1301 )", "section 30101 of title 46" for "subsection B(4) of the Ship Mortgage Act, 1920 ( 46 U.S.C. 911(4) )", and "Secretary of Transportation" for "Civil Aeronautics Board".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2000 AMENDMENT Amendment by Pub. L. 106-181 applicable only to fiscal years beginning after Sept. 30, 1999, see section 3 of Pub. L. 106-181 set out as a note under section 106 of Title 49, Transportation.
EFFECTIVE DATE OF 1994 AMENDMENT Amendment by Pub. L. 103-394 effective Oct. 22, 1994, with this section, as amended by section 201 of Pub. L. 103-394 applicable with respect to any lease, as defined by subsec. (c) of this section, entered into in connection with a settlement of any proceeding in any case pending under this title on Oct. 22, 1994, see section 702 of Pub. L. 103-394 set out as a note under section 101 of this title.
ABOLITION OF INTERSTATE COMMERCE COMMISSION AND TRANSFER OF FUNCTIONSInterstate Commerce Commission abolished and functions of Commission transferred, except as otherwise provided in Pub. L. 104-88 to Surface Transportation Board effective Jan. 1, 1996, by section 1302 of Title 49, Transportation, and section 101 of Pub. L. 104-88 set out as a note under section 1301 of Title 49. References to Interstate Commerce Commission deemed to refer to Surface Transportation Board, a member or employee of the Board, or Secretary of Transportation, as appropriate, see section 205 of Pub. L. 104-88 set out as a note under section 1301 of Title 49.
AIRCRAFT EQUIPMENT SETTLEMENT LEASES Pub. L. 103-7, 107 Stat. 36, provided that:
"SECTION 1. SHORT TITLE."This Act may be cited as the 'Aircraft Equipment Settlement Leases Act of 1993'.
"SEC. 2. TREATMENT OF AIRCRAFT EQUIPMENT SETTLEMENT LEASES WITH THE PENSION BENEFIT GUARANTY CORPORATION."In the case of any settlement of liability under title IV of the Employee Retirement Income Security Act of 1974 [ 29 U.S.C. 1301 et seq.] entered into by the Pension Benefit Guaranty Corporation and one or more other parties, if- "(1) such settlement was entered into before, on, or after the date of the enactment of this Act [Mar. 17, 1993],"(2) at least one party to such settlement was a debtor under title 11 of the United States Code, and"(3) an agreement that is entered into as part of such settlement provides that such agreement is to be treated as a lease, then such agreement shall be treated as a lease for purposes of section 1110 of such title 11."
- debtor
- The term "debtor" means person or municipality concerning which a case under this title has been commenced.(13A) The term "debtor's principal residence"-(A) means a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property; and(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer if used as the principal residence by the debtor.
- railroad
- The term "railroad" means common carrier by railroad engaged in the transportation of individuals or property or owner of trackage facilities leased by such a common carrier.
- security agreement
- The term "security agreement" means agreement that creates or provides for a security interest.
- security interest
- The term "security interest" means lien created by an agreement.(51A) The term "settlement payment" means, for purposes of the forward contract provisions of this title, a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade.(51B) The term "single asset real estate" means real property constituting a single property or project, other than residential real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.(51C) The term "small business case" means a case filed under chapter 11 of this title in which the debtor is a small business debtor and has not elected that subchapter V of chapter 11 of this title shall apply.(51D) The term "small business debtor"-(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning single asset real estate) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $2,000,000 1 (excluding debts owed to 1 or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor; and(B) does not include-(i) any member of a group of affiliated debtors under this title that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $2,000,000 1 (excluding debt owed to 1 or more affiliates or insiders);(ii) any debtor that is a corporation subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m, 78o(d) ); or(iii) any debtor that is an affiliate of a corporation described in clause (ii).
- transfer
- The term "transfer" means-(A) the creation of a lien;(B) the retention of title as a security interest;(C) the foreclosure of a debtor's equity of redemption; or(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with-(i) property; or(ii) an interest in property.(54A) The term "uninsured State member bank" means a State member bank (as defined in section 3 of the Federal Deposit Insurance Act) the deposits of which are not insured by the Federal Deposit Insurance Corporation.