U.S. Code » Title 11 » Chapter CHAPTER 11— REORGANIZATION › Subchapter SUBCHAPTER I— OFFICERS AND ADMINISTRATION

11 U.S.C. § 1110

Aircraft equipment and vessels

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(a)(1) Except as provided in paragraph (2) and subject to subsection (b), the right of a secured party with a security interest in equipment described in paragraph (3), 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, and to enforce any of its other rights or remedies, under such security agreement, lease, or conditional sale contract, to sell, lease, or otherwise retain or dispose of such equipment, is not limited or otherwise affected by any other provision of this title or by any power of the court.(2) The right to take possession and to enforce the other rights and remedies described in paragraph (1) shall be subject to section 362 if—(A) before the date that is 60 days after the date of the order for relief under this chapter, the trustee, subject to the approval of the court, agrees to perform all obligations of the debtor 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;(ii) that occurs after the date of the order and before the expiration of such 60-day period 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; and(iii) that occurs on or after the expiration of such 60-day period is cured in compliance with the terms of such security agreement, lease, or conditional sale contract, if a cure is permitted under that agreement, lease, or contract.(3) The equipment described in this paragraph—(A) is—(i) 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, at the time such transaction is entered into, holds an air carrier operating certificate issued 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(ii) a vessel documented under chapter 121 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, at the time such transaction is entered into, holds a certificate of public convenience and necessity or permit issued by the Department of Transportation; and(B) includes all records and documents relating to such equipment that are required, under the terms of the security agreement, lease, or conditional sale contract, to be surrendered or returned by the debtor in connection with the surrender or return of such equipment.(4) 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 approval of the court, to extend the 60-day period specified in subsection (a)(1).(c)(1) In any case under this chapter, the trustee shall immediately surrender and return to a secured party, lessor, or conditional vendor, described in subsection (a)(1), equipment described in subsection (a)(3), if at any time after the date of the order for relief under this chapter such secured party, lessor, or conditional vendor is entitled pursuant to subsection (a)(1) to take possession of such equipment and makes a written demand for such possession to the trustee.(2) At such time as the trustee is required under paragraph (1) to surrender and return equipment described in subsection (a)(3), any lease of such equipment, and any security agreement or conditional sale contract relating to such equipment, if such security agreement or conditional sale contract is an executory contract, shall be deemed rejected.(d) With respect to equipment first placed in service on or before October 22, 1994, 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, § 5(c), July 5, 1994, 108 Stat. 1373; Pub. L. 103–394, title II, § 201(a), Oct. 22, 1994, 108 Stat. 4119; Pub. L. 106–181, title VII, § 744(b), Apr. 5, 2000, 114 Stat. 177; Pub. L. 109–304, § 17(b)(2), Oct. 6, 2006, 120 Stat. 1707.)Historical and Revision Noteslegislative 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.

Editorial NotesAmendments

2006—Subsec. (a)(3)(A)(ii). Pub. L. 109–304 substituted “vessel documented under chapter 121 of title 46” for “documented vessel (as defined in section 30101(1) of title 46)”.

2000—Pub. L. 106–181 amended section catchline and text generally, substituting present provisions consisting of subsecs. (a) to (d) for former subsecs. (a) to (c) which contained somewhat similar provisions.

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”.

Statutory Notes and Related SubsidiariesEffective Date of 2000 Amendment

Amendment by Pub. L. 106–181 applicable only to fiscal years beginning after Sept. 30, 1999, see section 3 of Pub. L. 106–181, set out as a note under section 106 of Title 49, Transportation.

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 1302 of Title 49, Transportation, and section 101 of Pub. L. 104–88, set out as a note under section 1301 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 1301 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.”

Notes of Decisions
Cited in 72 cases (1 in the last 5 years), 1980–2023 · leading case: U.S. Bank Trust Nat'l Ass'n v. AMR Corp., 730 F.3d 88 (2d Cir. 2013).
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U.S. Bank Trust Nat'l Ass'n v. AMR Corp., 730 F.3d 88 (2d Cir. 2013). · cites it 12× “Bank; and (2) the requirements and consequences of an 11 U.S.C. § 1110 (a) election when the only outstanding default is an ipso facto default that triggered automatic acceleration of the debt.”
U.S. Bank Trust Nat'l Ass'n v. Am. Airlines, Inc. (In re AMR Corp.), 485 B.R. 279 (Bankr. S.D.N.Y. 2013). · cites it 8× “Almost one month after the filing of these bankruptcy cases, the Debtors proposed procedures to the Court to address the requirements of Bankruptcy Code Section 1110, which generally provides an exception to the automatic stay to permit an aircraft financer to repossess its…”
William D. Seidle, as Tr. for the Est. of Airlift Int'l, Inc., Debtor v. Gatx Leasing Corp., 778 F.2d 659 (11th Cir. 1985). · cites it 8× “§ 547 which allows a trustee in bankruptcy to recover preferential transfers and 11 U.S. C.A. § 1110 which provides for a stipulation leading to a debtor’s continued possession of an aircraft after defaults are cured.”
In Re Air Vermont, Inc., Debtor. California Chieftan v. Air Vermont, Inc., 761 F.2d 130 (2d Cir. 1985). · cites it 11× “Chieftain maintains that, as a conditional vendor of an aircraft to the vendee Air Vermont, it has a right, pursuant to 11 U.S.C. § 1110 , to repossess the aircraft from Air Vermont, since the latter has defaulted on its payments.”
In re Repub. Airways Holdings Inc., 547 B.R. 578 (Bankr. S.D.N.Y. 2016). · cites it 7× “To that end, the Motion seeks an order authorizing it (i) to surrender, return, and transfer title to certain aircraft or engines and all related “equipment” as defined by 11 U.S.C. § 1110 (a)(3), including the Citi Collateral; (ii) to abandon these aircraft, engines and related…”
In Re Airlift Int'l, Inc., Debtor, Gatx Leasing Corp. v. Airlift Int'l, Inc., 761 F.2d 1503 (11th Cir. 1985). · cites it 4× “After commencement of the case and prior to the appointment of Chapter 11 co-trustees, GATX and the debtor entered into a court approved stipulation pursuant to 11 U.S.C. § 1110 which obligated the debtor to pay the monthly installments coming due under the note and chattel…”
In Re Cont'l Airlines, Inc., Debtors, Cont'l Airlines, Inc., 932 F.2d 282 (3rd Cir. 1991). · cites it 3× “The district court ruled that aircraft held under bona fide leases, even though structured as sale-leasebacks, are exempt from the automatic stay in bankruptcy pursuant to 11 U.S.C. § 1110 , and therefore are subject to repossession.”
Boullioun Aircraft Holding Co. v. Smith Mgmt. W. Pac. Airlines, Inc., 181 F.3d 1191 (10th Cir. 1999). · cites it 3× “§ 365 (f)(1), which permits assignment of leases by a bankruptcy trustee, is not trumped by 11 U.S.C. § 1110 , which exempts, under certain circumstances, an aircraft lessor’s power to retrieve its aircraft following a lease default from the powers of the court to enjoin…”
Tenderloin Health v. Bank of the West, 849 F.3d 1231 (9th Cir. 2017). · cites it 2× “The trustee later sued to recover as preferential the prepetition payments made on the note. Id. The court rejected the preference action because the trustee was seeking to recover payments it was obligated to make under the court-approved stipulation.”
In Re Trejos, 352 B.R. 249 (Bankr. D. Nev. 2006). · cites it 2× “2d 488 (1991) (for purposes of former 11 U.S.C. § 1110 ); Gillie v. First State Bank (In re Gillie), 96 B.”
Vanguard Airlines, Inc. v. Int'l Aero Components, Inc. (In Re Vanguard Airlines, Inc.), 298 B.R. 626 (Bankr. W.D. Mo. 2003). · cites it 4× “On July 25, 2003, this Court ordered that 11 U.S.C. § 1110 prevented the Debtor from avoiding the unperfected hens of International Aero Components, Inc.”
Americredit Fin. Servs., Inc. v. Penrod (In Re Penrod), 392 B.R. 835 (9th Cir. BAP 2008). · cites it 2× “2d 488 (1991) (former 11 U.S.C. § 1110 ); H.R. Rep. No. 595, 95th Cong.”
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