Statutory lien

Statutory lien
See also

Statutory lien is "a lien created by operation of law and not by court order (a judicial lien) or agreement (consensual lien). A statutory lien cannot, however, include a judicial or consensual lien that may be created by statue" [1]. Another definition speaks of two types of liens, of which only one is "statutory" in the ordinary sense of the word. It is about here [2]:

  • Lien "arising solely by force of a statute on specified circumstances or conditions".
  • Lien of distress for rent, regardless of whether it is recognized as statutory.

Types of statutory liens are [3]:

  • Mechanics' liens
  • Contractor's liens
  • Warehousemen's liens
  • Tax liens

Statutory Lien Avoidance[edit]

Under section 545, the trustee can avoid several types of statutory liens [4]:

  1. A lien that applies only when the debtor is insolvent; bankruptcy proceedings have started or in the case of a financial situation that does not meet a certain standard. These laws are equivalent to the ipso facto clause, which are not covered by the Code. This provision is intended to prevent liens that may give creditors pre-emptive only when the debtor fails.
  2. A statutory lien may not be established if it can not be forced from a buyer who acts in good faith in the debtor's estate during the bankruptcy proceedings. It is not important in this case if the buyer exists. The only exception is the purchaser at a government tax lien sale.
  3. You can also avoid a statutory rent liens or liens for distress of rent.

Valid Statutory Liens and Tests of Validity[edit]

It was analyzed whether the trustee could avoid payments to the creditor if he failed to register his statutory lien due to payment. According to the Bankruptcy Code, such payments are maintained in force against the trustee's attack. The validity of such a statutory lien must be measured using a specially created test. In order to behave well with the trustee, the statutory lien must undergo three tests [5]:

  • Exists regardless of the financial situation of the debtor or the fact that bankruptcy proceedings are pending.
  • It must be improved or still in the course of improvement work under the law on non-bankruptcy at the time the petition is filed against the hypothetical buyer of the property which is the subject of the lien by the debtor.
  • It can not be beneficial to the landlord.

Footnotes[edit]

  1. D.L. Buchbinder 2009, pg. 95
  2. L.B. Bartell 2011
  3. R.E. Ginsberg, R.D. Martin, S.V. Kelley 2019, pg. 6-66
  4. D.L. Buchbinder 2009, pg. 252
  5. R.E. Ginsberg, R.D. Martin, S.V. Kelley 2019, pg. 8-72

References[edit]

Author: Angelika Guzik