Perfection of Mortgages, Mechanics Liens & Other claims under Bankruptcy Stay
The automatic stay in Bankruptcy prohibits “any act to create, perfect, or enforce any lien against property of the estate” BK Code 362(a)(4), but then creates exceptions under BK Code 362(b) which allow certain acts to perfect or maintain the perfected status of liens if they fall within certain periods.
Two exceptions are listed at BK Code 362(b)(3). One allows 30 days for recording a deed or mortgage after the transfer by cross reference to BK Code 547(e)(2);
The second allows a potentially indefinite period for perfecting certain liens by reference to BK Code 546(b)
s. 546(b) appears designed to allow later perfection of mechanics liens and other things which “relate back” to a prior period. There is no case law that I could find directly addressing its applicability to an entered but unfiled judgment and whether the filing of a judgment is barred by the automatic stay.
The concept in the cases under 546(b) seems to be that there must have been a pre-petition lien right to relate back to. Here are assorted Case headnotes:
- Application of Bankruptcy Code provision stating that trustee's avoidance powers are subject to applicable laws permitting perfection to be effective against entity acquiring property rights before perfection is not limited to lienors who can invoke “relation-back” statute; as long as applicable law authorizes perfection after another party has acquired interests in the property, provision applies. In re Lionel Corp., C.A.2 (N.Y.) 1994, 29 F.3d 88. Bankruptcy 2701
- If creditor possesses prepetition interest in property, and state law establishes time period for perfection of lien based upon that interest, lien does not lose its preferred standing by reason of fact that it is not perfected until after commencement of bankruptcy so long as it is perfected within time period established by state law. In re Parr Meadows Racing Ass'n, Inc., C.A.2 (N.Y.) 1989, 880 F.2d 1540, certiorari denied 110 S.Ct. 869, 493 U.S. 1058, 107 L.Ed.2d 953. Bankruptcy 2577
- A lien does not lose its preferred standing by reason of fact that it is not perfected until after commencement of bankruptcy or arrangement proceedings. Poly Industries, Inc. v. Mozley, C.A.9 (Cal.) 1966, 362 F.2d 453, certiorari denied 87 S.Ct. 393, 385 U.S. 958, 17 L.Ed.2d 304. Bankruptcy 2577; Bankruptcy 2952
- Subsec. (b) of this section applies to liens that relate back to prepetition date, but does not apply only to liens that relate back; the provision applies to liens that have that effect, regardless of whether the statutes that give rise to those liens use the concept, “relation back.” In re Microfab, Inc., Bkrtcy.D.Mass.1989, 105 B.R. 152. Bankruptcy 2572
- Postpetition perfection of interest in property of estate is not prohibited, to extent permitted by state law, where such perfection would give creditor rights in properties superior to those of trustee. In re Bain, W.D.Va.1986, 64 B.R. 581. Bankruptcy 2588
- If perfection of a lien has no retroactive effect, such perfection does not fall within exception to the automatic stay. Matter of Gotta, Bkrtcy.W.D.Wis.1985, 47 B.R. 198. Bankruptcy 2397(1.5)
- Although as general rule, this title permits trustee, or debtor in possession, to avoid liens which are unperfected on date debtor's petition is filed, such avoidance power is subject to any generally applicable law that permits perfection of lien to be effective against an entity that acquires rights in property before date of perfection. In re Boots Builders, Inc., Bkrtcy.N.D.Tex.1981, 11 B.R. 635. Bankruptcy 2572
- If under applicable law a later perfection of a lien will relate back to the bankruptcy filing, the subsequent perfection will be good against the trustee and the lien will not be avoided. In re Saberman, Bkrtcy.N.D.Ill.1980, 3 B.R. 316. Bankruptcy 2577
Based on the above, it appears to be very much a matter of state law as to whether a later recorded/perfected instrument "relates back" ahead of a bankruptcy filing, or alternatively is barred by the automatic stay.
