Opinion ID: 617777
Heading Depth: 3
Heading Rank: 1

Heading: Pertinent Bankruptcy Code Provisions

Text: As a familiar bedrock of bankruptcy law, the automatic stay creates breathing room for debtors, at least temporarily, by foreclosing creditors from pursuing certain collection efforts against the debtor's assets once a petition for bankruptcy has been filed. 11 U.S.C. § 362(a); In re 229 Main St. Ltd. P'ship, 262 F.3d 1, 3 (1st Cir.2001). The stay bars a variety of creditor activities, including any act to create, perfect, or enforce any lien against property of the estate. 11 U.S.C. § 362(a)(4); see also 11 U.S.C. § 362(a)(5). This broad proscription has limits. Pertinent here, section 362(b)(3) provides that the stay does not extend to any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee's rights and powers are subject to such perfection under section 546(b) of [the Bankruptcy Code].... Application of this exception to the stay depends upon the existence of three conditions: there must be (1) an `act to perfect' (2) an `interest in property ' (3) under circumstances in which the perfection-authorizing statute fits within the contours of section 546(b) []. 229 Main St., 262 F.3d at 4 (emphasis added). While section 362(b)(3) limits the automatic stay, its companion statute, section 546(b), limits the debtor's power to avoid statutory liens under the so-called strong arm provision. See id. The instant that a bankruptcy petition is filed, the bankruptcy trustee is vested with the status of a hypothetical bona fide purchaser of real property, and may ordinarily avoid any transfer of the property or obligation of the debtor to the extent allowed under state law. See 11 U.S.C. § 544(a)(3); In re Ryan, 851 F.2d 502, 505 (1st Cir.1988); see also 11 U.S.C. § 544(a)(1) (trustee deemed to have status of hypothetical judicial lien holder). Section 546(b)(1)(A), however, staves off this pervasive power when generally applicable law ... permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection. 11 U.S.C. § 546(b)(1)(A) (emphasis added); see also 11 U.S.C. § 546(b)(1)(B). For a creditor to enjoy this haven, (1) the creditor must act pursuant to a law of general applicability; (2) that law must allow the creditor to perfect an interest in property ' and (3) such perfection must be effective against previously acquired rights in the property. 229 Main St., 262 F.3d at 10 (emphasis added). The gist of this exception is that the filing of a bankruptcy petition does not prevent the holder of an interest in property from perfecting its interest if, absent the bankruptcy filing, the interest holder could have perfected its interest against an entity acquiring rights in the property before the date of perfection. Id. at 12 (quotations omitted). As earlier noted, the debtors' challenge to the application of sections 362(b) and 546(b)(1)(A) is solely based on the existence of a single element common to both exceptionswhether Banco Popular had acquired a pre-petition interest in property. See 229 Main St., 262 F.3d at 9 (the simultaneous postpetition creation and perfection of a lien may come within the pertinent exception to the automatic stay so long as the creditor holds a valid prepetition interest in the property). We limit our review accordingly.