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TITLE 11–BANKRUPTCY

CHAPTER 11– REORGANIZATION

Sub Chapter – Officers and Administration

Sec. 1110. Aircraft equipment and vessels


    (a)(1) The right of a secured party with a security interest in 
equipment described in paragraph (2) or of a lessor or conditional 
vendor of such equipment to take possession of such equipment in 
compliance with a security agreement, lease, or conditional sale 
contract is not affected by section 362, 363, or 1129 or by any power of 
the court to enjoin the taking of possession unless--
        (A) before the date that is 60 days after the date of the order 
    for relief under this chapter, the trustee, subject to the court's 
    approval, agrees to perform all obligations of the debtor that 
    become due on or after the date of the order under such security 
    agreement, lease, or conditional sale contract; and
        (B) any default, other than a default of a kind specified in 
    section 365(b)(2), under such security agreement, lease, or 
    conditional sale contract--
            (i) that occurs before the date of the order is cured before 
        the expiration of such 60-day period; and
            (ii) that occurs after the date of the order is cured before 
        the later of--
                (I) the date that is 30 days after the date of the 
            default; or
                (II) the expiration of such 60-day period.

    (2) Equipment is described in this paragraph if it is--
        (A) an aircraft, aircraft engine, propeller, appliance, or spare 
    part (as defined in section 40102 of title 49) that is subject to a 
    security interest granted by, leased to, or conditionally sold to a 
    debtor that is a citizen of the United States (as defined in section 
    40102 of title 49) holding an air carrier operating certificate 
    issued by the Secretary of Transportation pursuant to chapter 447 of 
    title 49 for aircraft capable of carrying 10 or more individuals or 
    6,000 pounds or more of cargo; or
        (B) a documented vessel (as defined in section 30101(1) of title 
    46) that is subject to a security interest granted by, leased to, or 
    conditionally sold to a debtor that is a water carrier that holds a 
    certificate of public convenience and necessity or permit issued by 
    the Interstate Commerce Commission.

    (3) Paragraph (1) applies to a secured party, lessor, or conditional 
vendor acting in its own behalf or acting as trustee or otherwise in 
behalf of another party.
    (b) The trustee and the secured party, lessor, or conditional vendor 
whose right to take possession is protected under subsection (a) may 
agree, subject to the court's approval, to extend the 60-day period 
specified in subsection (a)(1).
    (c) With respect to equipment first placed in service on or prior to 
the date of enactment of this subsection, for purposes of this section--
        (1) the term ``lease'' includes any written agreement with 
    respect to which the lessor and the debtor, as lessee, have 
    expressed in the agreement or in a substantially contemporaneous 
    writing that the agreement is to be treated as a lease for Federal 
    income tax purposes; and
        (2) the term ``security interest'' means a purchase-money 
    equipment security interest.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2629; Pub. L. 103-272, 
Sec. 5(c), July 5, 1994, 108 Stat. 1373; Pub. L. 103-394, title II, 
Sec. 201(a), Oct. 22, 1994, 108 Stat. 4119.)


                      Historical and Revision Notes

                         legislative statements

    Section 1110 of the House amendment adopts an identical provision 
contained in the House bill without modifications contained in the 
Senate amendment. This section protects a limited class of financiers of 
aircraft and vessels and is intended to be narrowly construed to prevent 
secured parties or lessors from gaining the protection of the section 
unless the interest of such lessor or secured party is explicitly 
enumerated therein. It should be emphasized that under section 1110(a) a 
debtor in possession or trustee is given 60 days after the order for 
relief in a case under chapter 11, to have an opportunity to comply with 
the provisions of section 1110(a).
    During this time the automatic stay will apply and may not be lifted 
prior to the expiration of the 60-day period. Under section 1110(b), the 
debtor and secured party or lessor are given an opportunity to extend 
the 60-day period, but no right to reduce the period is intended. It 
should additionally be noted that under section 1110(a) the trustee or 
debtor in possession is not required to assume the executory contract or 
unexpired lease under section 1110; rather, if the trustee or debtor in 
possession complies with the requirements of section 1110(a), the 
trustee or debtor in possession is entitled to retain the aircraft or 
vessels subject to the normal requirements of section 365. The 
discussion regarding aircraft and vessels likewise applies with respect 
to railroad rolling stock in a railroad reorganization under section 
1168.


                        senate report no. 95-989

    This section, to a large degree, preserves the protection given 
lessors and conditional vendors of aircraft to a certificated air 
carrier or of vessels to a certificated water carrier under section 
116(5) and 116(6) of present Chapter X [section 516(5) and (6) of former 
title 11]. It is modified to conform with the consolidation of Chapters 
X and XI [chapters 10 and 11 of former title 11] and with the new 
chapter 11 generally. It is also modified to give the trustee in a 
reorganization case an opportunity to continue in possession of the 
equipment in question by curing defaults and by making the required 
lease or purchase payments. This removes the absolute veto power over a 
reorganization that lessors and conditional vendors have under present 
law, while entitling them to protection of their investment.
    The section overrides the automatic stay or any power of the court 
to enjoin taking of possession of certain leased, conditionally sold, or 
liened equipment, unless, the trustee agrees to perform the debtor's 
obligations and cures all prior defaults (other than defaults under ipso 
facto or bankruptcy clauses) within 60 days after the order for relief. 
The trustee and the equipment financer are permitted to extend the 60-
day period by agreement. During the first 60 days, the automatic stay 
will apply to prevent foreclosure unless the creditor gets relief from 
the stay.
    The effect of this section will be the same if the debtor has 
granted the security interest to the financer or if the debtor is 
leasing equipment from a financer that has leveraged the lease and 
leased the equipment subject to a security interest of a third party.

                       References in Text

    The date of enactment of this subsection, referred to in subsec. 
(c), is the date of enactment of Pub. L. 103-394, which added subsec. 
(c) and was approved Oct. 22, 1994.


                               Amendments

    1994--Pub. L. 103-394 amended section generally. Prior to amendment, 
section read as follows:
    ``(a) The right of a secured party with a purchase-money equipment 
security interest in, or of a lessor or conditional vendor of, whether 
as trustee or otherwise, aircraft, aircraft engines, propellers, 
appliances, or spare parts, as defined in section 40102(a) of title 49, 
or vessels of the United States, as defined in section 30101 of title 
46, that are subject to a purchase-money equipment security interest 
granted by, leased to, or conditionally sold to, a debtor that is an air 
carrier operating under a certificate of convenience and necessity 
issued by the Secretary of Transportation, or a water carrier that holds 
a certificate of public convenience and necessity or permit issued by 
the Interstate Commerce Commission, as the case may be, to take 
possession of such equipment in compliance with the provisions of a 
purchase-money equipment security agreement, lease, or conditional sale 
contract, as the case may be, is not affected by section 362 or 363 of 
this title or by any power of the court to enjoin such taking of 
possession, unless--
        ``(1) before 60 days after the date of the order for relief 
    under this chapter, the trustee, subject to the court's approval, 
    agrees to perform all obligations of the debtor that become due on 
    or after such date under such security agreement, lease, or 
    conditional sale contract, as the case may be; and
        ``(2) any default, other than a default of a kind specified in 
    section 365(b)(2) of this title, under such security agreement, 
    lease, or conditional sale contract, as the case may be--
            ``(A) that occurred before such date is cured before the 
        expiration of such 60-day period; and
            ``(B) that occurs after such date is cured before the later 
        of--
                ``(i) 30 days after the date of such default; and
                ``(ii) the expiration of such 60-day period.
    ``(b) The trustee and the secured party, lessor, or conditional 
vendor, as the case may be, whose right to take possession is protected 
under subsection (a) of this section may agree, subject to the court's 
approval, to extend the 60-day period specified in subsection (a)(1) of 
this section.''
    Subsec. (a). Pub. L. 103-272 substituted ``section 40102(a) of title 
49'' for ``section 101 of the Federal Aviation Act of 1958 (49 U.S.C. 
1301)'', ``section 30101 of title 46'' for ``subsection B(4) of the Ship 
Mortgage Act, 1920 (46 U.S.C. 911(4))'', and ``Secretary of 
Transportation'' for ``Civil Aeronautics Board''.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, with this 
section, as amended by section 201 of Pub. L. 103-394, applicable with 
respect to any lease, as defined by subsec. (c) of this section, entered 
into in connection with a settlement of any proceeding in any case 
pending under this title on Oct. 22, 1994, see section 702 of Pub. L. 
103-394, set out as a note under section 101 of this title.

  Abolition of Interstate Commerce Commission and Transfer of Functions

    Interstate Commerce Commission abolished and functions of Commission 
transferred, except as otherwise provided in Pub. L. 104-88, to Surface 
Transportation Board effective Jan. 1, 1996, by section 702 of Title 49, 
Transportation, and section 101 of Pub. L. 104-88, set out as a note 
under section 701 of Title 49. References to Interstate Commerce 
Commission deemed to refer to Surface Transportation Board, a member or 
employee of the Board, or Secretary of Transportation, as appropriate, 
see section 205 of Pub. L. 104-88, set out as a note under section 701 
of Title 49.


                  Aircraft Equipment Settlement Leases

    Pub. L. 103-7, Mar. 17, 1993, 107 Stat. 36, provided that:
``SECTION 1. SHORT TITLE.
    ``This Act may be cited as the `Aircraft Equipment Settlement Leases 
Act of 1993'.
``SEC. 2. TREATMENT OF AIRCRAFT EQUIPMENT SETTLEMENT LEASES WITH THE 
        PENSION BENEFIT GUARANTY CORPORATION.
    ``In the case of any settlement of liability under title IV of the 
Employee Retirement Income Security Act of 1974 [29 U.S.C. 1301 et seq.] 
entered into by the Pension Benefit Guaranty Corporation and one or more 
other parties, if--
        ``(1) such settlement was entered into before, on, or after the 
    date of the enactment of this Act [Mar. 17, 1993],
        ``(2) at least one party to such settlement was a debtor under 
    title 11 of the United States Code, and
        ``(3) an agreement that is entered into as part of such 
    settlement provides that such agreement is to be treated as a lease,
then such agreement shall be treated as a lease for purposes of section 
1110 of such title 11.''

                  Section Referred to in Other Sections

    This section is referred to in section 348 of this title.


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