An Act to amend sections 1, 17a, 57j, 64a (5) 67 (b) 67c, and 70c of the Bankruptcy Act, and for other purposes
PL 89-495 (H.R.136), enacted 07/05/1966

268 
July 5, 196 6 
[H. R. X36] 
Bankruptcy. 
Statutory liens. 
30 Stat. 544; 
5 2 Stat. 840. 
Debts having 
priority. 
66 Stat. 427. 
11 u s e 96. 
Post, p. 269. 
PUBLIC LAW 89-495-JULY 5, 1966 
[80 STAT. 
Public Law 89-495 
AN A C T 
.To amend sections 1, 17a, 64a(5), 67(b), 67c, and 70c of the Bankruptcy Act, 
and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That section. 1 (11 
U.S.C. 1) of the Bankruptcy Act approved July 1,1898, as amended, 
is amended by inserting after paragraph 29 the following new para-
graph: 
"(29a) 'Statutory lien' shall mean a lien arising solely by force of 
statute upon specified circumstances or conditions, but shall not 
include any lien provided by or dependent upon an agreement to give 
security, whether or not such lien is also provided by or is also depend-
ent upon statute and whether or not the agreement or lien is made 
fully effective by statute." 
SEO. 2. Clause (5) of subsection a of section 64 of said Act (11 
U.S.C. 104(a)) is amended to read as follows: 
"(5) debts other than for taxes owing to any person, including 
the United States, who by the laws of the United States is 
entitled to priority, and rent owing to a landlord who is entitled 
to priority by applicable State law or who is entitled to priority 
by paragraph (2) of subdivision c of section 67 of this Act: 
Provided., hoioever., That such priority for rent to a landlord 
shall be restricted to the rent which is legally due and owing for 
the actual use and occupancy of the premises affected, and which 
accrued within three months before the date of bankruptcy." 
SEO. 3. Subsection b of section 67 of said Act (11 U.S.C. 107(b)), 
is amended to read as follows: 
"b. The provisions of section 60 of this Act to the contrary notwith-
standing and except as otherwise provided in subdivision c of this 
section, statutory liens in favor of employees, contractors, mechanics, 
or any other class of persons, and statutory liens for taxes and debts 
owing to the United States or to any State or any subdivision thereof, 
created or recognized by the laws of the United States or any State, 
may be valid against the trustee, even though arising or perfected while 
the debtor is insolvent and within four months prior to the filing of 
the petition initiating a proceeding under this Act by or against him." 
SEC. 4. Subsection c of section 67 of said Act (11 U.S.C. 107(c)) 
is amended to read as follows: 
"c. (1) The following liens shall be invalid against the trustee: 
"(A) every statutory lien which first becomes effective upon 
the insolvency of the debtor, or upon distribution or liquidation of 
his property, or upon execution against his property levied at the 
instance of One other than the lienor; 
"(B) every statutory lien which is not perfected or enforce-
able at the date of bankruptcy against one acquiring the rights 
of a bona fide purchaser from the debtor on that date, whether 
or not such purchaser exists: Provided., That where a statutory 
lien is not invalid at the date of bankruptcy against the trustee 
under subdivision c of section 70 of this Act and is required by 
applicable lien law to be perfected in order to be valid against 
a subsequent bona fide purchaser, such a lien may nevertheless 
be valid under this subdivision if perfected within the time per-
mitted by and in accordance with the requirements of such law: 
And 'provided further., That if applicable lien law requires a lien 
valid against the trustee under section 70, subdivision c, to be 
perfected by the seizure of property, it shall instead be perfected 
Post, p. 271. 
Liens on pei^ 
sonal property. 
80 STAT. ] 
PUBLIC LAW 89-495-JULY 5, 1966 
269 
as permitted by this subdivision c of section 67 by filing notice 
thereof with the court; 
"(C) every statutory lien for rent and every lien of distress 
for rent, whether statutory or not. A right of distress for rent 
which creates a security interest in property shall be deemed 
a lien for the purposes of this subdivision c. 
" (2) The court may, on due notice, order any of the aforesaid liens 
invalidated against the trustee to be preserved for the benefit of the 
estate and in that event the lien shall pass to the trustee. A lien not 
preserved for the benefit of the estate but invalidated against the 
trustee shall be invalid as against all liens indefeasible in bankruptcy, 
so as to have the effect of promoting liens indefeasible in bankruptcy 
which would otherwise be subordinate to such invalidated lien. 
Claims for wages, taxes, and rent secured b^^ liens hereby invalidated 
ciaims for 
or preserved shall be respectively allowable with priority and '^^^^^' 
restricted as are debts therefor entitled to priority under clauses (2), 
(4), and (5) of subdivision a of section 64 of this Act, even though p^l^^^^^l'^'^' 
not otherwise granted priority. 
"(3) Every tax lien on personal property not accompanied by 
possession shall be postponed in payment to the debts specified in 
clauses (1) and (2) of subdivision a of section 64 of this Act. Where 
such a tax lien is prior in right to liens indefeasible in bankruptcy, the 
court shall order payment from the proceeds derived from the sale of 
the personal property to which the tax lien attaches, less the actual 
cost of that sale, of an amount not in excess of the tax lien, to the debts 
specified in clauses (1) and (2) of subdivision a of section 64 of this 
Act. If the amount realized from the sale exceeds the total of such 
debts, after allowing for prior indefeasible liens and the cost of the 
sale, the excess up to the amount of the difference between the total 
paid to the debts specified in clauses (1) and (2) of subdivision a of 
section 64 of this Act and the amount of the tax lien, is to be paid to 
the holder of the tax lien. 
" (4) Where a penalty not allowable under subdivision j of section 
57 is secured by a lien, the portion of the lien securing such penalty 
shall not be eligible for preservation under this subdivision c. 
"(5) This suodivision c shall not apply to liens enforced by sale 
before the filing of the petition, nor to liens against property set aside 
to the bankrupt as exempt, nor to liens against property abandoned 
by the trustee or unadministered in bankruptcy for any reason and 
shall not apply in proceedings under section 77 of this Act, nor in 
^^ ^^^ ^°^-
proceedings under chapter X of this Act unless an order has been 
entered directing that bankruptcy be proceeded with." 
SEC. 5. Subsection c of section 70 of said Act (11 U.S.C. 110(c)) .Jr'^^^^t' 
^ 
, , , 
T ( » - n 
\ / / 
tenses; rigiits and 
IS amended to read as rollows: 
"c. The trustee may have the benefit of all defenses available to the 
bankrupt as against third persons, including statutes of limitation, 
statutes of frauds, usury, and other personal defenses; and a waiver 
of any such defense by the bankrupt after bankruptcy shall not bind 
the trustee. The trustee shall have as of the date of bankruptcy the 
rights and powers of: (1) a creditor who obtained a judgment against 
the bankrupt upon the date of bankruptcy, whether or not such a 
creditor exists, (2) a creditor who upon the date of bankruptcy 
obtained an execution returned unsatisfied against the bankrupt, 
whether or not such a creditor exists, and (3) a creditor who upon 
the date of bankruptcy obtained a lien by legal or equitable proceed-
ings upon all property, whether or not coming into possession or con-
trol of the court, upon which a creditor of the oankrupt upon a simple 
contract could have obtained such a lien, whether or not such a creditor 
exists. Tf a transfer is valid in part against creditors whose rights 
65-300 0-67—20 
11 use 93. 
powers. 
270 
PUBLIC LAW 89-496-JULY 5, 1966 
[80 STAT. 
and powers are conferred upon the trustee under this subdivision, it 
shall be valid to a like extent against the trustee. 
In cases where 
repugnancy or inconsistency exists with reference to the rights and 
powers in this subdivision conferred, the trustee may elect which 
rights and powers to exercise with reference to a particular party, a 
particular remedy, or a particular transaction, without prejudice to 
his right to maintain a different position with reference to a different 
party, a different remedy, or a different transaction." 
Approved July 5, 1966. 
Public Law 89-496 
July 5, 1966 
AN ACT 
[H. R. 3438] 
To amend the Bankruptcy xict with respect to limiting the priority and non-
dischargeability of taxes in bankruptcy. 
Be it enacted hy the Senate and House of Representatives 
of the 
Taxe^^**^^ 
United States of America in Congress assembled, That subdivision 
52 Stat. 842. 
(a) of section 2 of the Bankruptcy Act, as amended (11 U.S.C. 11), 
is amended by inserting after paragraph (2) the following new 
paragraph: 
"(2A) Hear and determine, or cause to be heard and determined, 
any question arising as to the amount or legality of any unpaid tax, 
whether or not previously assessed, which has not prior to bankruptcy 
been contested before and adjudicated by a judicial or administrative 
tribunal of competent jurisdiction, and m respect to any tax, whether 
or not paid, when any such question has been contested and adjudicated 
by a judicial or administrative tribunal of competent jurisdiction and 
the time for appeal or review has not expired, to authorize the receiver 
or the trustee to prosecute such appeal or review;". 
fecte'db"^^dis- 
^^^- ^' Clause (1) of subdivision a of section 17 of such Act, as 
charge. 
amended (11 U.S.C. 35), is amended to read as follows: 
"(1) are taxes which became legally due and owing by the 
bankrupt to the United States or to any State or any subdivision 
thereof within three years preceding bankruptcy: 
Provided., 
however, That a discharge in bankruptcy shall not release a bank-
rupt from any taxes (a) which were not assessed in any case in 
which the bankrupt failed to make a return required by law, 
(b) which were assessed within one year preceding bankruptcy 
in any case in which the bankrupt failed to make a return required 
by law, (c) which were not reported on a return made by the 
bankrupt and which were not assessed prior to bankruptcy by 
reason of a prohibition on assessment pending the exhaustion of 
administrative or judicial remedies available to the bankrupt, 
(d) with respect to which the bankrupt made a false or fraudulent 
return, or willfully attempted in any manner to evade or defeat, 
or (e) which the bankrupt has collected or withheld from others 
as required by the laws of the United States or any State or polit-
ical subdivision thereof, but has not paid over; but a discharge 
shall not be a bar to any remedies available under applicable 
law to the United States or to any State or any subdivision 
thereof, against the exemption of the bankrupt allowed by law 
and duly set apart to him under this Act: And provided 
further, 
That a discharge in bankruptcy shall not release or affect any 
tax lien."