Source: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section724&num=0&edition=prelim
Timestamp: 2019-09-17 12:49:20
Document Index: 390952226

Matched Legal Cases: ['§ 724', '§724', '§477', '§283', '§304', '§501', '§701', '§2', '§67', '§701', '§701', '§701', '§304', '§501', '§477', '§477', '§477', '§477', '§477']

[USC02] 11 USC 724: Treatment of certain liens
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11 USC 724: Treatment of certain liens Text contains those laws in effect on September 16, 2019
§724. Treatment of certain liens
(b) Property in which the estate has an interest and that is subject to a lien that is not avoidable under this title (other than to the extent that there is a properly perfected unavoidable tax lien arising in connection with an ad valorem tax on real or personal property of the estate) and that secures an allowed claim for a tax, or proceeds of such property, shall be distributed-
(2) second, to any holder of a claim of a kind specified in section 507(a)(1)(C) or 507(a)(2) (except that such expenses under each such section, other than claims for wages, salaries, or commissions that arise after the date of the filing of the petition, shall be limited to expenses incurred under this chapter and shall not include expenses incurred under chapter 11 of this title), 507(a)(1)(A), 507(a)(1)(B), 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of this title, to the extent of the amount of such allowed tax claim that is secured by such tax lien;
(e) Before subordinating a tax lien on real or personal property of the estate, the trustee shall-
( Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2607 ; Pub. L. 98–353, title III, §477, July 10, 1984, 98 Stat. 381 ; Pub. L. 99–554, title II, §283(r), Oct. 27, 1986, 100 Stat. 3118 ; Pub. L. 103–394, title III, §304(h)(4), title V, §501(d)(23), Oct. 22, 1994, 108 Stat. 4134 , 4146; Pub. L. 109–8, title VII, §701(a), Apr. 20, 2005, 119 Stat. 124 ; Pub. L. 111–327, §2(a)(27), Dec. 22, 2010, 124 Stat. 3560 .)
Treatment of certain liens: The House amendment modifies present law by requiring the subordination of tax liens on both real and personal property to the payment of claims having a priority. This means that assets are to be distributed from the debtor's estate to pay higher priority claims before the tax claims are paid, even though the tax claims are properly secured. Under present law and the Senate amendment only tax liens on personal property, but not on real property, are subordinated to the payment of claims having a priority above the priority for tax claims.
Subsection (a) of section 724 permits the trustee to avoid a lien that secures a fine, penalty, forfeiture, or multiple, punitive, or exemplary damages claim to the extent that the claim is not compensation for actual pecuniary loss. The subsection follows the policy found in section 57j of the Bankruptcy Act [section 93(j) of former title 11] of protecting unsecured creditors from the debtor's wrongdoing, but expands the protection afforded. The lien is made voidable rather than void in chapter 7, in order to permit the lien to be revived if the case is converted to chapter 11 under which penalty liens are not voidable. To make the lien void would be to permit the filing of a chapter 7, the voiding of the lien, and the conversion to a chapter 11, simply to avoid a penalty lien, which should be valid in a reorganization case.
Subsection (b) governs tax liens. This provision retains the rule of present bankruptcy law (§67(C)(3) of the Bankruptcy Act [section 107(c)(3) of former title 11]) that a tax lien on personal property, if not avoidable by the trustee, is subordinated in payment to unsecured claims having a higher priority than unsecured tax claims. Those other claims may be satisfied from the amount that would otherwise have been applied to the tax lien, and any excess of the amount of the lien is then applied to the tax. Any personal property (or sale proceeds) remaining is to be used to satisfy claims secured by liens which are junior to the tax lien. Any proceeds remaining are next applied to pay any unpaid balance of the tax lien.
2010-Subsec. (b)(2). Pub. L. 111–327 substituted "507(a)(1)(C) or 507(a)(2)" for "507(a)(1)", "this chapter" for "chapter 7 of this title", and "507(a)(1)(A), 507(a)(1)(B)," for "507(a)(2)," and inserted "under each such section" after "such expenses".
2005-Subsec. (b). Pub. L. 109–8, §701(a)(1), inserted "(other than to the extent that there is a properly perfected unavoidable tax lien arising in connection with an ad valorem tax on real or personal property of the estate)" after "under this title" in introductory provisions.
Subsec. (b)(2). Pub. L. 109–8, §701(a)(2), inserted "(except that such expenses, other than claims for wages, salaries, or commissions that arise after the date of the filing of the petition, shall be limited to expenses incurred under chapter 7 of this title and shall not include expenses incurred under chapter 11 of this title)" after "section 507(a)(1)".
Subsecs. (e), (f). Pub. L. 109–8, §701(a)(3), added subsecs. (e) and (f).
1994-Subsec. (b)(2). Pub. L. 103–394, §304(h)(4), substituted "507(a)(6), or 507(a)(7)" for "or 507(a)(6)".
Subsec. (d). Pub. L. 103–394, §501(d)(23), substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954 (26 U.S.C. 6323)".
1986-Subsec. (b)(2). Pub. L. 99–554 inserted reference to section 507(a)(6) of this title.
1984-Subsec. (b). Pub. L. 98–353, §477(a)(1), substituted "a tax" for "taxes" in provisions preceding par. (1).
Subsec. (b)(2). Pub. L. 98–353, §477(a)(2), substituted "any holder of a claim of a kind specified" for "claims specified", "section 507(a)(1)" for "sections 507(a)(1)", and "or 507(a)(5) of this title" for "and 507(a)(5) of this title".
Subsec. (b)(3). Pub. L. 98–353, §477(a)(3), substituted "allowed tax claim" for "allowed claim".
Subsec. (c). Pub. L. 98–353, §477(b), substituted "holder of a claim is entitled" for "creditor is entitled" and "holders" for "creditors" in two places.
Subsec. (d). Pub. L. 98–353, §477(c), substituted "the priority of which" for "whose priority" and "the same as if such lien were a tax lien" for "the same as a tax lien".