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Codified Statutes
- U.S. Code
- TITLE 11 — BANKRUPTCY
- CHAPTER 3 — CASE ADMINISTRATION(§§ 301 to 366)
- SUBCHAPTER IV — ADMINISTRATIVE POWERS(§§ 361 to 366)
11 U.S.C. § 364. Obtaining credit
(a)
If the trustee is authorized to operate the
business of the debtor under section 721, 1108, 1183, 1184, 1203, 1204, or 1304 of this title, unless the court orders otherwise, the trustee may
obtain unsecured credit and incur unsecured debt in the ordinary course of business
allowable under section 503(b)(1) of
this title as an administrative expense.
(b)
The court, after notice and a hearing, may
authorize the trustee to obtain unsecured credit or to incur unsecured debt other
than under subsection (a) of this section, allowable under section 503(b)(1) of this title as an administrative
expense.
(c)
If the trustee is unable to obtain unsecured
credit allowable under section 503(b)(1)
of this title as an administrative expense, the court, after notice and a hearing,
may authorize the obtaining of credit or the incurring of debt—
(2)
secured by a lien on property of the
estate that is not otherwise subject to a lien; or
(3)
secured by a junior lien on property of
the estate that is subject to a lien.
(d)
(1)
The court, after notice and a hearing, may
authorize the obtaining of credit or the incurring of debt secured by a senior or
equal lien on property of the estate that is subject to a lien only if—
(A)
the trustee is unable to obtain such
credit otherwise; and
(B)
there is adequate protection of the
interest of the holder of the lien on the property of the estate on which such
senior or equal lien is proposed to be granted.
(2)
In any hearing under this subsection, the
trustee has the burden of proof on the issue of adequate protection.
(e)
The reversal or modification on appeal of an
authorization under this section to obtain credit or incur debt, or of a grant under
this section of a priority or a lien, does not affect the validity of any debt so
incurred, or any priority or lien so granted, to an entity that extended such credit
in good faith, whether or not such entity knew of the pendency of the appeal, unless
such authorization and the incurring of such debt, or the granting of such priority
or lien, were stayed pending appeal.
(f)
Except with respect to an entity that is an
underwriter as defined in section 1145(b) of this title, section 5 of the Securities Act of
1933, the Trust Indenture Act of 1939, and any State or
local law requiring registration for offer or sale of a security or registration or
licensing of an issuer of, underwriter of, or broker or dealer in, a security does
not apply to the offer or sale under this section of a security that is not an
equity security.
Pub. L. 95-598, Nov. 6, 1978,
92 Stat. 2574; Pub. L. 99-554, title II, Sec. 257(l),
Oct. 27, 1986, 100 Stat.
3115; Pub. L. 103-394, title V, Sec.
501(d)(9), Oct. 22, 1994, 108 Stat.
4144. Pub. L. 116-54, sec. 4(a)(7), Aug. 23,
2019 133 Stat. 1086
. Pub. L. 116-260, Div. N, Title III,
sec. 320(a), (f)(2)(A)(i), Dec. 27, 2020, 134 Stat.
2015 , 2016.
Amendment of Section and Termination of Amendment
Pub. L. 116-260, Div. N, Title III,
sec. 320(a), (f)(1), Dec. 27, 2020, 134 Stat.
2015 , 2016,provided that:
"(g)
(1)
"The court, after notice and a hearing, may authorize a debtor in possession or
a trustee that is authorized to operate the business of the debtor under section
1183, 1184, 1203, 1204, or 1304 of this title to obtain a loan under paragraph
(36) or (37) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)), and such loan shall be treated as a debt
to the extent the loan is not forgiven in accordance with section 7A of the Small
Business Act or subparagraph (J) of such paragraph (37), as applicable, with
priority equal to a claim of the kind specified in subsection (c)(1) of this
section.
"(2)
"The trustee may incur debt described in paragraph (1) notwithstanding any
provision in a contract, prior order authorizing the trustee to incur debt under
this section, prior order authorizing the trustee to use cash collateral under
section 363, or applicable law that prohibits the debtor from incurring additional
debt.
"(3)
"The court shall hold a hearing within 7 days after the filing and service of
the motion to obtain a loan described in paragraph (1). Notwithstanding the
Federal Rules of Bankruptcy Procedure, at such hearing, the court may grant relief
on a final basis."
Pub. L. 116-260, Div. N, Title III,
§320(f)(2), Dec. 27, 2020, 134 Stat.
2016, provided that, if the amendment made to this section by Pub. L. 116–260, §320(a), takes effect, effective on the date that is 2 years after Dec. 27, 2020, with provisions
relating to applicability to cases commenced before such date, this section is amended
by striking subsection (g).
Historical and Revision Notes
Section 364(f) of the House amendment is new. This provision
continues the exemption found in section 3(a)(7) of the Securities Act of
1933[15 U.S.C. 77c(a)(7)] for certificates of indebtedness issued
by a trustee in bankruptcy. The exemption applies to any debt security issued
under section 364 of title 11. The section does not intend to change present law
which exempts such securities from the Trust Indenture Act, 15 U.S.C. 77aaa, et seq. (1976).
Senate Report No. 95-989
This section is derived from provisions in current law
governing certificates of indebtedness, but is much broader. It governs all
obtaining of credit and incurring of debt by the estate.
Subsection (a) authorizes the obtaining of unsecured credit and
the incurring of unsecured debt in the ordinary course of business if the business
of the debtor is authorized to be operated under section 721, 1108, or 1304. The
debts so incurred are allowable as administrative expenses under section
503(b)(1). The court may limit the estate's ability to incur debt under this
subsection.
Subsection (b) permits the court to authorize the trustee to
obtain unsecured credit and incur unsecured debts other than in the ordinary
course of business, such as in order to wind up a liquidation case, or to obtain a
substantial loan in an operating case. Debt incurred under this subsection is
allowable as an administrative expense under section 503(b)(1).
Subsection (c) is closer to the concept of certificates of
indebtedness in current law. It authorizes the obtaining of credit and the
incurring of debt with some special priority, if the trustee is unable to obtain
unsecured credit under subsection (a) or (b). The various priorities are (1) with
priority over any or all administrative expenses: (2) secured by a lien on
unencumbered property of the estate; or (3) secured by a junior lien on encumbered
property. The priorities granted under this subsection do not interfere with
existing property rights.
Subsection (d) grants the court the authority to authorize the
obtaining of credit and the incurring of debt with a superiority, that is a lien
on encumbered property that is senior or equal to the existing lien on the
property. The court may authorize such a superpriority only if the trustee is
otherwise unable to obtain credit, and if there is adequate protection of the
original lien holder's interest. Again, the trustee has the burden of proof on the
issue of adequate protection.
Subsection (e) provides the same protection for credit
extenders pending an appeal of an authorization to incur debt as is provided under
section 363(l) for purchasers: the credit is not affected on appeal by reversal of
the authorization and the incurring of the debt were stayed pending appeal. The
protection runs to a good faith lender, whether or not he knew of the pendency of
the appeal.
A claim arising as a result of lending or borrowing under this
section will be a priority claim, as defined in proposed section 507(a)(1), even
if the claim is granted a super-priority over administrative expenses and is to be
paid in advance of other first priority claims.
References in Text
Section 5 of the Securities Act of 1933,
referred to in subsec. (f), is classified to section 77e of Title 15, Commerce and Trade.
The Trust Indenture Act of 1939, referred to in
subsec. (f), is title III of act May 27, 1933, ch. 38, as added Aug. 3, 1939, ch.
411, 53 Stat. 1149, as amended,
which is classified generally to subchapter III (Sec. 77aaa et seq.) of chapter 2A of Title 15. For complete
classification of this Act to the Code, see section 77aaa of Title 15 and Tables.
Amendments
2020-Pub. L. 116-260
Div. N, Title III, sec. 320, amended adding subsection (g).
2019-Pub. L. 116-54
Sec. 4(a)(7), amended (a) by inserting "1183, 1184," after "1108,".
1994—Subsec. (a). Pub. L.
103-394, Sec. 501(d)(9)(A), substituted "1203,
1204, or 1304" for "1304, 1203, or 1204".
Subsec. (f). Pub. L.
103-394, Sec. 501(d)(9)(B), struck out "(15 U.S.C.
77e)" after "Act of 1933" and "(15 U.S.C. 77aaa et seq.)"
after "Act of 1939".
1986—Subsec. (a). Pub. L.
99-554 inserted reference to sections 1203 and 1204 of this
title.
Effective and Termination Dates of 2020 Amendment
Pub. L. 116-260, Div. N, Title III,
sec. 320(f), Dec. 27, 2020, 134 Stat.
2016, provided that:
"(1) Effective date —
The amendments made by subsections (a) through (e) shall—
"(A)
take effect on the date on which the Administrator submits to the Director of the
Executive Office for United States Trustees a written determination that, subject
to satisfying any other eligibility requirements, any debtor in possession or trustee
that is authorized to operate the business of the debtor under section 1183, 1184,
1203, 1204, or 1304 of title 11, United States Code, would be eligible for a loan
under paragraphs (36) and (37) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)); and
"(B)
apply to any case pending on or commenced on or after the date described in subparagraph
(A).
"(2) Sunset
"(A) In general —
If the amendments made by subsections (a) through (e) [amending this section and sections
503, 1191, 1225, and 1325 of this title] take effect under paragraph (1), effective
on the date that is 2 years after the date of enactment of this Act—
"(i)
section 364 of title 11, United States Code, is amended by striking subsection (g);
"(ii)
section 503(b) of title 11, United States Code, is amended—
"(I)
in paragraph (8)(B), by adding "and" at the end;
"(II)
in paragraph (9), by striking "; and" at the end and inserting a period; and
"(III)
by striking paragraph (10);
"(iii)
section 1191 of title 11, United States Code, is amended by striking subsection (f);
"(iv)
section 1225 of title 11, United States Code, is amended by striking subsection (d);
and
"(v)
section 1325 of title 11, United States Code, is amended by striking subsection (d).
"(B) Applicability —
Notwithstanding the amendments made by subparagraph (A) of this paragraph, if the
amendments made by subsections (a) through (e) take effect under paragraph (1) of
this subsection, such amendments shall apply to any case under title 11, United States
Code, commenced before the date that is 2 years after the date of enactment of this
Act. "
Effective Date of 2020 Amendment
Pub. L. 116-260, Div. N, Title III,
sec. 320(f)(2), Dec. 27, 2020, 134 Stat.
0000, provided that:
"(1) Effective date —
"The amendments made by subsections (a) through (e) shall—
"(A)
"take effect on the date on which the Administrator submits to the
Director of the Executive Office for United States Trustees a written
determination that, subject to satisfying any other eligibility
requirements, any debtor in possession or trustee that is authorized to
operate the business of the debtor under section 1183, 1184, 1203, 1204, or
1304 of title 11, United States Code, would be eligible for a loan under
paragraphs (36) and (37) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)); and
"(B)
"apply to any case pending on or commenced on or after the date described
in subparagraph (A). "
Effective Date of 2019 Amendment
Pub. L. 116-54, sec. 5, Aug. 23, 2019
133 Stat. 1086, provided that:
Amendment by Pub. L. 116–54 effective 180 days after Aug. 23, 2019, see section 5
of Pub. L. 116–54, set out as a note under section 101 of this title.
Effective Date of 1994 Amendment
Amendment by Pub. L.
103-394 effective Oct. 22, 1994, and not applicable with respect to
cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under
section 101 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L.
99-554 effective 30 days after Oct. 27, 1986, but not applicable to
cases commenced under this title before that date, see section 302(a), (c)(1) of
Pub. L. 99-554, set out as a note
under section 581 of Title 28,
Judiciary and Judicial Procedure.