11 U.S. Code § 363 - Use, sale, or lease of property
(a)
In this section, “cash collateral” means
cash, negotiable instruments, documents of title, securities, deposit
accounts, or other cash equivalents whenever acquired in which the
estate and an entity other than the estate have an interest and includes
the proceeds, products, offspring, rents, or profits of property and
the fees, charges, accounts or other payments for the use or occupancy
of rooms and other public facilities in hotels, motels, or other lodging
properties subject to a security interest as provided in section
552
(b) of this title, whether existing before or after the commencement of a case under this title.
(b)
(1)
The trustee, after notice and a
hearing, may use, sell, or lease, other than in the ordinary course of
business, property of the estate, except that if the debtor in
connection with offering a product or a service discloses to an
individual a policy prohibiting the transfer of personally identifiable
information about individuals to persons that are not affiliated with
the debtor and if such policy is in effect on the date of the
commencement of the case, then the trustee may not sell or lease
personally identifiable information to any person unless—
(B)
after appointment of a consumer privacy ombudsman in accordance with section
332, and after notice and a hearing, the court approves such sale or such lease—
(2)
If notification is required under subsection (a) ofsection
7A of the Clayton Act in the case of a transaction under this subsection, then—
(A)
notwithstanding subsection (a) of
such section, the notification required by such subsection to be given
by the debtor shall be given by the trustee; and
(B)
notwithstanding subsection (b) of
such section, the required waiting period shall end on the 15th day
after the date of the receipt, by the Federal Trade Commission and the
Assistant Attorney General in charge of the Antitrust Division of the
Department of Justice, of the notification required under such
subsection (a), unless such waiting period is extended—
(c)
(1)
If the business of the debtor is authorized to be operated under section
721,
1108,
1203,
1204, or
1304
of this title and unless the court orders otherwise, the trustee may
enter into transactions, including the sale or lease of property of the
estate, in the ordinary course of business, without notice or a hearing,
and may use property of the estate in the ordinary course of business
without notice or a hearing.
(2)
The trustee may not use, sell, or lease cash collateral under paragraph (1) of this subsection unless—
(3)
Any hearing under paragraph (2)(B) of
this subsection may be a preliminary hearing or may be consolidated with
a hearing under subsection (e) of this section, but shall be scheduled
in accordance with the needs of the debtor. If the hearing under
paragraph (2)(B) of this subsection is a preliminary hearing, the court
may authorize such use, sale, or lease only if there is a reasonable
likelihood that the trustee will prevail at the final hearing under
subsection (e) of this section. The court shall act promptly on any
request for authorization under paragraph (2)(B) of this subsection.
(d)
The trustee may use, sell, or lease property under subsection (b) or (c) of this section—
(1)
in the case of a debtor that is a
corporation or trust that is not a moneyed business, commercial
corporation, or trust, only in accordance with nonbankruptcy law
applicable to the transfer of property by a debtor that is such a
corporation or trust; and
(2)
only to the extent not inconsistent with any relief granted under subsection (c), (d), (e), or (f) ofsection
362.
(e)
Notwithstanding any other provision of this
section, at any time, on request of an entity that has an interest in
property used, sold, or leased, or proposed to be used, sold, or leased,
by the trustee, the court, with or without a hearing, shall prohibit or
condition such use, sale, or lease as is necessary to provide adequate
protection of such interest. This subsection also applies to property
that is subject to any unexpired lease of personal property (to the
exclusion of such property being subject to an order to grant relief
from the stay under section
362).
(f)
The trustee may sell property under
subsection (b) or (c) of this section free and clear of any interest in
such property of an entity other than the estate, only if—
(g)
Notwithstanding subsection (f) of this
section, the trustee may sell property under subsection (b) or (c) of
this section free and clear of any vested or contingent right in the
nature of dower or curtesy.
(h)
Notwithstanding subsection (f) of this
section, the trustee may sell both the estate’s interest, under
subsection (b) or (c) of this section, and the interest of any co-owner
in property in which the debtor had, at the time of the commencement of
the case, an undivided interest as a tenant in common, joint tenant, or
tenant by the entirety, only if—
(2)
sale of the estate’s undivided interest
in such property would realize significantly less for the estate than
sale of such property free of the interests of such co-owners;
(i)
Before the consummation of a sale of
property to which subsection (g) or (h) of this section applies, or of
property of the estate that was community property of the debtor and the
debtor’s spouse immediately before the commencement of the case, the
debtor’s spouse, or a co-owner of such property, as the case may be, may
purchase such property at the price at which such sale is to be
consummated.
(j)
After a sale of property to which
subsection (g) or (h) of this section applies, the trustee shall
distribute to the debtor’s spouse or the co-owners of such property, as
the case may be, and to the estate, the proceeds of such sale, less the
costs and expenses, not including any compensation of the trustee, of
such sale, according to the interests of such spouse or co-owners, and
of the estate.
(k)
At a sale under subsection (b) of this
section of property that is subject to a lien that secures an allowed
claim, unless the court for cause orders otherwise the holder of such
claim may bid at such sale, and, if the holder of such claim purchases
such property, such holder may offset such claim against the purchase
price of such property.
(l)
Subject to the provisions of section
365,
the trustee may use, sell, or lease property under subsection (b) or
(c) of this section, or a plan under chapter 11, 12, or 13 of this title
may provide for the use, sale, or lease of property, notwithstanding
any provision in a contract, a lease, or applicable law that is
conditioned on the insolvency or financial condition of the debtor, on
the commencement of a case under this title concerning the debtor, or on
the appointment of or the taking possession by a trustee in a case
under this title or a custodian, and that effects, or gives an option to
effect, a forfeiture, modification, or termination of the debtor’s
interest in such property.
(m)
The reversal or modification on appeal of
an authorization under subsection (b) or (c) of this section of a sale
or lease of property does not affect the validity of a sale or lease
under such authorization to an entity that purchased or leased such
property in good faith, whether or not such entity knew of the pendency
of the appeal, unless such authorization and such sale or lease were
stayed pending appeal.
(n)
The trustee may avoid a sale under this
section if the sale price was controlled by an agreement among potential
bidders at such sale, or may recover from a party to such agreement any
amount by which the value of the property sold exceeds the price at
which such sale was consummated, and may recover any costs, attorneys’
fees, or expenses incurred in avoiding such sale or recovering such
amount. In addition to any recovery under the preceding sentence, the
court may grant judgment for punitive damages in favor of the estate and
against any such party that entered into such an agreement in willful
disregard of this subsection.
(o)
Notwithstanding subsection (f), if a person
purchases any interest in a consumer credit transaction that is subject
to the Truth in Lending Act or any interest in a consumer credit
contract (as defined in section
433.1 of title 16 of the Code of Federal Regulations (January 1, 2004),
as amended from time to time), and if such interest is purchased through
a sale under this section, then such person shall remain subject to all
claims and defenses that are related to such consumer credit
transaction or such consumer credit contract, to the same extent as such
person would be subject to such claims and defenses of the consumer had
such interest been purchased at a sale not under this section.
Source
(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2572; Pub. L. 98–353, title III, § 442,July 10, 1984, 98 Stat. 371; Pub. L. 99–554, title II, § 257(k),Oct. 27, 1986, 100 Stat. 3115; Pub. L. 103–394, title I, § 109, title II, §§ 214(b),
219(c), title V, § 501(d)(8),Oct. 22, 1994, 108 Stat. 4113, 4126, 4129, 4144; Pub. L. 109–8, title II, §§ 204,
231(a), title XII, § 1221(a),Apr. 20, 2005, 119 Stat. 49, 72, 195; Pub. L. 111–327, § 2(a)(13),Dec. 22, 2010, 124 Stat. 3559.)
Historical and Revision Notes
legislative statements
Section 363(a) of the House amendment
defines “cash collateral” as defined in the Senate amendment. The
broader definition of “soft collateral” contained in H.R. 8200
as passed by the House is deleted to remove limitations that were
placed on the use, lease, or sale of inventory, accounts, contract
rights, general intangibles, and chattel paper by the trustee or debtor
in possession.
Section 363(c)(2) of the House amendment is derived from the Senate amendment. Similarly, sections
363
(c)(3) and (4) are derived from comparable provisions in the Senate amendment in lieu of the contrary procedure contained in section
363
(c)
as passed by the House. The policy of the House amendment will
generally require the court to schedule a preliminary hearing in
accordance with the needs of the debtor to authorize the trustee or
debtor in possession to use, sell, or lease cash collateral. The trustee
or debtor in possession may use, sell, or lease cash collateral in the
ordinary course of business only “after notice and a hearing.”
Section 363(f) of the House amendment
adopts an identical provision contained in the House bill, as opposed to
an alternative provision contained in the Senate amendment.
Section 363(h) of the House amendment
adopts a new paragraph (4) representing a compromise between the House
bill and Senate amendment. The provision adds a limitation indicating
that a trustee or debtor in possession sell jointly owned property only
if the property is not used in the production, transmission, or
distribution for sale, of electric energy or of natural or synthetic gas
for heat, light, or power. This limitation is intended to protect
public utilities from being deprived of power sources because of the
bankruptcy of a joint owner.
Section 363(k) of the House amendment is
derived from the third sentence of section 363(e) of the Senate
amendment. The provision indicates that a secured creditor may bid in
the full amount of the creditor’s allowed claim, including the secured
portion and any unsecured portion thereof in the event the creditor is
undersecured, with respect to property that is subject to a lien that
secures the allowed claim of the sale of the property.
senate report no. 95–989
This section defines the right and powers
of the trustee with respect to the use, sale or lease of property and
the rights of other parties that have interests in the property
involved. It applies in both liquidation and reorganization cases.
Subsection (a) defines “cash collateral”
as cash, negotiable instruments, documents of title, securities, deposit
accounts, or other cash equivalents in which the estate and an entity
other than the estate have an interest, such as a lien or a co-ownership
interest. The definition is not restricted to property of the estate
that is cash collateral on the date of the filing of the petition. Thus,
if “non-cash” collateral is disposed of and the proceeds come within
the definition of “cash collateral” as set forth in this subsection, the
proceeds would be cash collateral as long as they remain subject to the
original lien on the “non-cash” collateral under section
552
(b).
To illustrate, rents received from real property before or after the
commencement of the case would be cash collateral to the extent that
they are subject to a lien.
Subsection (b) permits the trustees to
use, sell, or lease, other than in the ordinary course of business,
property of the estate upon notice and opportunity for objections and
hearing thereon.
Subsection (c) governs use, sale, or lease
in the ordinary course of business. If the business of the debtor is
authorized to be operated under § 721, 1108, or 1304 of the
bankruptcy code, then the trustee may use, sell, or lease property in
the ordinary course of business or enter into ordinary course
transactions without need for notice and hearing. This power is subject
to several limitations. First, the court may restrict the trustee’s
powers in the order authorizing operation of the business. Second, with
respect to cash collateral, the trustee may not use, sell, or lease cash
collateral except upon court authorization after notice and a hearing,
or with the consent of each entity that has an interest in such cash
collateral. The same preliminary hearing procedure in the automatic stay
section applies to a hearing under this subsection. In addition, the
trustee is required to segregate and account for any cash collateral in
the trustee’s possession, custody, or control.
Under subsections (d) and (e), the use,
sale, or lease of property is further limited by the concept of adequate
protection. Sale, use, or lease of property in which an entity other
than the estate has an interest may be effected only to the extent not
inconsistent with any relief from the stay granted to that interest’s
holder. Moreover, the court may prohibit or condition the use, sale, or
lease as is necessary to provide adequate protection of that interest.
Again, the trustee has the burden of proof on the issue of adequate
protection. Subsection (e) also provides that where a sale of the
property is proposed, an entity that has an interest in such property
may bid at the sale thereof and set off against the purchase price up to
the amount of such entity’s claim. No prior valuation under section
506
(a) would limit this bidding right, since the bid at the sale would be determinative of value.
Subsection (f) permits sale of property
free and clear of any interest in the property of an entity other than
the estate. The trustee may sell free and clear if applicable
nonbankruptcy law permits it, if the other entity consents, if the
interest is a lien and the sale price of the property is greater than
the amount secured by the lien, if the interest is in bona fide dispute,
or if the other entity could be compelled to accept a money
satisfaction of the interest in a legal or equitable proceeding. Sale
under this subsection is subject to the adequate protection requirement.
Most often, adequate protection in connection with a sale free and
clear of other interests will be to have those interests attach to the
proceeds of the sale.
At a sale free and clear of other
interests, any holder of any interest in the property being sold will be
permitted to bid. If that holder is the high bidder, he will be
permitted to offset the value of his interest against the purchase price
of the property. Thus, in the most common situation, a holder of a lien
on property being sold may bid at the sale and, if successful, may
offset the amount owed to him that is secured by the lien on the
property (but may not offset other amounts owed to him) against the
purchase price, and be liable to the trustee for the balance of the sale
price, if any.
Subsection (g) permits the trustee to sell free and clear of any vested or contingent right in the nature of dower or curtesy.
Subsection (h) permits sale of a
co-owner’s interest in property in which the debtor had an undivided
ownership interest such as a joint tenancy, a tenancy in common, or a
tenancy by the entirety. Such a sale is permissible only if partition is
impracticable, if sale of the estate’s interest would realize
significantly less for the estate that sale of the property free of the
interests of the co-owners, and if the benefit to the estate of such a
sale outweighs any detriment to the co-owners. This subsection does not
apply to a co-owner’s interest in a public utility when a disruption of
the utilities services could result.
Subsection (i) provides protections for
co-owners and spouses with dower, curtesy, or community property rights.
It gives a right of first refusal to the co-owner or spouse at the
price at which the sale is to be consummated.
Subsection (j) requires the trustee to
distribute to the spouse or co-owner the appropriate portion of the
proceeds of the sale, less certain administrative expenses.
Subsection (k) [enacted as (l)] permits
the trustee to use, sell, or lease property notwithstanding certain
bankruptcy or ipso facto clauses that terminate the debtor’s interest in
the property or that work a forfeiture or modification of that
interest. This subsection is not as broad as the anti-ipso facto
provision in proposed 11 U.S.C. 541
(c)(1).
Subsection (l) [enacted as (m)] protects
good faith purchasers of property sold under this section from a
reversal on appeal of the sale authorization, unless the authorization
for the sale and the sale itself were stayed pending appeal. The
purchaser’s knowledge of the appeal is irrelevant to the issue of good
faith.
Subsection (m) [enacted as (n)] is
directed at collusive bidding on property sold under this section. It
permits the trustee to void a sale if the price of the sale was
controlled by an agreement among potential bidders. The trustees may
also recover the excess of the value of the property over the purchase
price, and may recover any costs, attorney’s fees, or expenses incurred
in voiding the sale or recovering the difference. In addition, the court
is authorized to grant judgment in favor of the estate and against the
collusive bidder if the agreement controlling the sale price was entered
into in willful disregard of this subsection. The subsection does not
specify the precise measure of damages, but simply provides for punitive
damages, to be fixed in light of the circumstances.
References in Text
Section 7A of the Clayton Act, referred to in subsec. (b)(2), is classified to section
18a of Title
15, Commerce and Trade.
The Truth in Lending Act, referred to in subsec. (o), is title I of Pub. L. 90–321, May 29, 1968, 82 Stat. 146, as amended, which is classified generally to subchapter I (§ 1601 et seq.) of chapter
41 of Title
15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under section
1601 of Title
15 and Tables.
Amendments
2010—Subsec. (d). Pub. L. 111–327, § 2(a)(13)(A), struck out “only” before dash at end of introductory provisions.
Subsec. (d)(1). Pub. L. 111–327,
§ 2(a)(13)(B), amended par. (1) generally. Prior to amendment,
par. (1) read as follows: “in accordance with applicable nonbankruptcy
law that governs the transfer of property by a corporation or trust that
is not a moneyed, business, or commercial corporation or trust; and”.
Subsec. (d)(2). Pub. L. 111–327, § 2(a)(13)(C), inserted “only” before “to the extent”.
2005—Subsec. (b)(1). Pub. L. 109–8,
§ 231(a), substituted “, except that if the debtor in connection
with offering a product or a service discloses to an individual a policy
prohibiting the transfer of personally identifiable information about
individuals to persons that are not affiliated with the debtor and if
such policy is in effect on the date of the commencement of the case,
then the trustee may not sell or lease personally identifiable
information to any person unless—” and subpars. (A) and (B) for period
at end.
Subsec. (d). Pub. L. 109–8,
§ 1221(a), substituted “only—” and pars. (1) and (2) for “only to
the extent not inconsistent with any relief granted under section
362
(c),
362
(d),
362
(e), or
362
(f) of this title.”
Subsecs. (o), (p). Pub. L. 109–8, § 204, added subsec. (o) and redesignated former subsec. (o) as (p).
1994—Subsec. (a). Pub. L. 103–394,
§ 214(b), inserted “and the fees, charges, accounts or other
payments for the use or occupancy of rooms and other public facilities
in hotels, motels, or other lodging properties” after “property”.
Subsec. (b)(2). Pub. L. 103–394, §§ 109,
501
(d)(8)(A), struck out “(15 U.S.C. 18a)” after “Clayton Act” and amended subpars. (A) and (B) generally. Prior to amendment, subpars. (A) and (B) read as follows:
“(A) notwithstanding subsection (a) of such section, such notification shall be given by the trustee; and
“(B) notwithstanding subsection (b) of
such section, the required waiting period shall end on the tenth day
after the date of the receipt of such notification, unless the court,
after notice and hearing, orders otherwise.”
Subsec. (c)(1). Pub. L. 103–394, § 501(d)(8)(B), substituted “1203, 1204, or 1304” for “1304, 1203, or 1204”.
Subsec. (e). Pub. L. 103–394,
§ 219(c), inserted at end “This subsection also applies to
property that is subject to any unexpired lease of personal property (to
the exclusion of such property being subject to an order to grant
relief from the stay under section
362).”
1986—Subsec. (c)(1). Pub. L. 99–554, § 257(k)(1), inserted reference to sections
1203 and
1204 of this title.
Subsec. (l). Pub. L. 99–554, § 257(k)(2), inserted reference to chapter 12.
1984—Subsec. (a). Pub. L. 98–353,
§ 442(a), inserted “whenever acquired” after “equivalents” and
“and includes the proceeds, products, offspring, rents, or profits of
property subject to a security interest as provided in section
552
(b) of this title, whether existing before or after the commencement of a case under this title” after “interest”.
Subsec. (b). Pub. L. 98–353, § 442(b), designated existing provisions as par. (1) and added par. (2).
Subsec. (e). Pub. L. 98–353,
§ 442(c), inserted “, with or without a hearing,” after “court”
and struck out “In any hearing under this section, the trustee has the
burden of proof on the issue of adequate protection”.
Subsec. (f)(3). Pub. L. 98–353, § 442(d), substituted “all liens on such property” for “such interest”.
Subsec. (h). Pub. L. 98–353, § 442(e), substituted “at the time of” for “immediately before”.
Subsec. (j). Pub. L. 98–353, § 442(f), substituted “compensation” for “compenation”.
Subsec. (k). Pub. L. 98–353,
§ 442(g), substituted “unless the court for cause orders otherwise
the holder of such claim may bid at such sale, and, if the holder” for
“if the holder”.
Subsec. (l). Pub. L. 98–353, § 442(h), substituted “Subject to the provisions of section
365, the trustee” for “The trustee”, “condition” for “conditions”, “or the taking” for “a taking”, and “interest” for “interests”.
Subsec. (n). Pub. L. 98–353,
§ 442(i), substituted “avoid” for “void”, “avoiding” for
“voiding”, and “In addition to any recovery under the preceding
sentence, the court may grant judgment for punitive damages in favor of
the estate and against any such party that entered into such an
agreement in willful disregard of this subsection” for “The court may
grant judgment in favor of the estate and against any such party that
entered into such agreement in willful disregard of this subsection for
punitive damages in addition to any recovery under the preceding
sentence”.
Subsec. (o). Pub. L. 98–353, § 442(j), added subsec. (o).
Effective Date of 2005 Amendment
Pub. L. 109–8, title XII, § 1221(d),Apr. 20, 2005, 119 Stat. 196, provided that: “The amendments made by this section [amending this section and sections
541 and
1129
of this title and enacting provisions set out as a note under this
section] shall apply to a case pending under title 11, United States
Code, on the date of enactment of this Act [Apr. 20, 2005], or filed
under that title on or after that date of enactment, except that the
court shall not confirm a plan under chapter
11 of title
11,
United States Code, without considering whether this section would
substantially affect the rights of a party in interest who first
acquired rights with respect to the debtor after the date of the filing
of the petition. The parties who may appear and be heard in a proceeding
under this section include the attorney general of the State in which
the debtor is incorporated, was formed, or does business.”
Amendment by sections 204 and 231(a) ofPub. L. 109–8effective
180 days after Apr. 20, 2005, and not applicable with respect to cases
commenced under this title before such effective date, except as
otherwise provided, see section 1501 ofPub. L. 109–8, set out as a note under section
101 of this title.
Effective Date of 1994 Amendment
Amendment by Pub. L. 103–394effective
Oct. 22, 1994, and not applicable with respect to cases commenced under
this title before Oct. 22, 1994, see section 702 ofPub. L. 103–394, set out as a note under section
101 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–554effective
30 days after Oct. 27, 1986, but not applicable to cases commenced
under this title before that date, see section 302(a), (c)(1) ofPub. L. 99–554, set out as a note under section
581 of Title
28, Judiciary and Judicial Procedure.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–353effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) ofPub. L. 98–353, set out as a note under section
101 of this title.
Construction of Section 1221 of Pub. L. 109–8
Pub. L. 109–8, title XII, § 1221(e),Apr. 20, 2005, 119 Stat. 196,
provided that: “Nothing in this section [see Effective Date of 2005
Amendment note above] shall be construed to require the court in which a
case under chapter
11 of title
11,
United States Code, is pending to remand or refer any proceeding,
issue, or controversy to any other court or to require the approval of
any other court for the transfer of property.”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
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