U.S. Code » Title 11 » Chapter CHAPTER 3— CASE ADMINISTRATION › Subchapter SUBCHAPTER IV— ADMINISTRATIVE POWERS

11 U.S.C. § 364

Obtaining credit

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(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—(1) with priority over any or all administrative expenses of the kind specified in section 503(b) or 507(b) of this title;(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, § 257(l), Oct. 27, 1986, 100 Stat. 3115; Pub. L. 103–394, title V, § 501(d)(9), Oct. 22, 1994, 108 Stat. 4144; Pub. L. 116–54, § 4(a)(7), Aug. 23, 2019, 133 Stat. 1086; Pub. L. 116–260, div. N, title III, § 320(a), (f)(2)(A)(i), Dec. 27, 2020, 134 Stat. 2015, 2016.)Historical and Revision Noteslegislative statements

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.

Editorial NotesReferences 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, which is classified generally to subchapter III (§ 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—Subsec. (g). Pub. L. 116–260, § 320(f)(2)(A)(i), contingent on its addition by Pub. L. 116–260, § 320(a), struck out subsec. (g) which read as follows:

“(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, § 320(a), added subsec. (g).

2019—Subsec. (a). Pub. L. 116–54 inserted “1183, 1184,” after “1108,”.

1994—Subsec. (a). Pub. L. 103–394, § 501(d)(9)(A), substituted “1203, 1204, or 1304” for “1304, 1203, or 1204”.

Subsec. (f). Pub. L. 103–394, § 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.

Statutory Notes and Related SubsidiariesEffective and Termination Dates of 2020 Amendment

Pub. L. 116–260, div. N, title III, § 320(f), Dec. 27, 2020, 134 Stat. 2016, provided that:“(1)Effective date.—The amendments made by subsections (a) through (e) [amending this section and sections 503, 1191, 1225, and 1325 of this title] shall—“(A) take effect on the date on which the Administrator [of the Small Business Administration] 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) take effect under paragraph (1), effective on the date that is 2 years after the date of enactment of this Act [Dec. 27, 2020]—“(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 [Dec. 27, 2020].”

[Pursuant to 15 U.S.C. 636(a)(36)(A)(iii), the “covered period” for loans under the Paycheck Protection Program ended on June 30, 2021.]

Effective Date of 2019 Amendment

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.

Notes of Decisions
Cited in 638 cases (50 in the last 5 years), 1980–2026 · leading case: Sapir v. CPQ Colorchrome Corp. (In Re Photo Promotion Assocs., Inc.), 87 B.R. 835 (Bankr. S.D.N.Y. 1988).
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Sapir v. CPQ Colorchrome Corp. (In Re Photo Promotion Assocs., Inc.), 87 B.R. 835 (Bankr. S.D.N.Y. 1988). · cites it 42× “The agreement violated 11 U.S.C. § 364 (c) because no court approval was obtained, with the result that Colorchrome could not assert a secured interest in the debtor’s accounts receivable which the then Chapter 11 debtor assigned to Colorchrome as security for Colorchrome’s…”
In Re 495 Cent. Park Avenue Corp., 136 B.R. 626 (Bankr. S.D.N.Y. 1992). · cites it 22× “(“495 Central Avenue”), the debtor in this Chapter 11 case, has moved pursuant to 11 U.S.C. § 364 (d) for an order authorizing it to borrow funds from either Leon Silverman (“Silverman”) and Tom Borek (“Borek”), shareholders of the debtor, or from third-party lenders supported…”
Keybank Nat'l Ass'n v. Franklin Advisers, Inc., 600 B.R. 214 (S.D. Ill. 2019). · cites it 5× “5 See 11 U.S.C. § 364 (authorizing debtors-in-possession to obtain, after notice and a hearing, certain post-petition financing from lenders, in exchange for providing lenders with various security enhancements, such as priority claims to, and liens on, the DIP collateral); Fed.”
Trans World Airlines, Inc. v. Texaco, Inc. (In Re Texaco, Inc.), 92 B.R. 38 (S.D.N.Y. 1988). · cites it 8× “4 To finance the $3 billion cash payment to Pennzoil, Texaco moved under 11 U.S.C. § 364 (c) 5 for court approval of a financing agreement providing for secured revolving credit with a syndicate of banks totalling, in the aggregate, $3 billion (the “Financing Agreement”).”
Desert Fire Prot. v. Fontainebleau Las Vegas Holdings, LLC (In Re Fontainebleau Las Vegas Holdings, LLC), 434 B.R. 716 (S.D. Fla. 2010). · cites it 11× “11, 2010), the Statutory Lienholders state, was the only way the Debtors could provide a priming lien to the Term Lenders because 11 U.S.C. § 364 (d) allows for priming liens only when a debt- or seeks to obtain future extensions of credit, see Shapiro v.”
First Sec. Bank & Trust Co. v. Vegt, 511 B.R. 567 (N.D. Iowa 2014). · cites it 15× “585 This appeal from a decision of the bankruptcy court for the Northern District of Iowa raises the question of whether family dairy farmers should be permitted to incur $300,000 in additional debt for farm improvements, pursuant to 11 U.S.C. § 364 (d), from a new creditor,…”
Bennett v. Jefferson Cnty., 518 B.R. 613 (N.D. Ala. 2014). · cites it 10× “) Also, the County argues that the appeal of the Confirmation Order is “statutorily” moot because 11 U.S.C. § 364 (e) “precludes this Court from unwinding the New Sewer Warrants .”
Mulligan v. Sobiech, 131 B.R. 917 (S.D.N.Y. 1991). · cites it 9× “Mulligan pursuant to 11 U.S.C. § 364 (c)(2). By affidavit annexed to the Order to Show Cause the debtor stated that “[a]s security for the repayment of the indebtedness, the lender is requesting that the debtor obtain from the Bankruptcy Court, a security interest under Section…”
In Re Levitt & Sons, LLC., 384 B.R. 630 (Bankr. S.D. Florida 2008). · cites it 15× “All of the Debtors’ obligations under the DIP Financing, including all loans thereunder, shall be deemed to have extended by Wachovia as the DIP Lender in good faith, as that term is used at 11 U.S.C. § 364 (e), and in express reliance upon the protections offered by that…”
Thomas E. Reynolds v. ServisFirst Bank, 17 F.4th 116 (11th Cir. 2021). · cites it 3× “Our Saybrook decision involved 11 U.S.C. § 364 , which al- lows trustees to obtain additional credit on behalf of Chapter 11 debtors and contains a 363(m)-like provision mooting appeals from orders approving new loans to debtors.”
Bensten v. Grant (In Re Gloria Mfg. Corp.), 65 B.R. 341 (E.D. Va. 1985). · cites it 10× “He asserted that the urgent need of funds to meet the payroll, and lack of time, prevented him from first making an application to the Court to have such advance and loan given approval, as provided for in section 364(c) of the Bankruptcy Act, 11 U.S.C. § 364 (c). 1 Before the…”
In Re Crouse Grp., Inc., 71 B.R. 544 (Bankr. E.D. Pa. 1987). · cites it 10× “ssion who have recently filed, with several other related entities, jointly-administered Chapter 11 bankruptcy Petitions, is whether we should grant contested Motions seeking approval of certain Stipulations by which the Debt *546 ors propose to obtain credit for the purpose of…”
Show all 638 citing cases →
— 11 U.S.C. § 364(a) — 1 case
Sapir v. CPQ Colorchrome Corp. (In Re Photo Promotion Assocs., Inc.), 87 B.R. 835 (Bankr. S.D.N.Y. 1988). “The agreement violated 11 U.S.C. § 364 (c) because no court approval was obtained, with the result that Colorchrome could not assert a secured interest in the debtor’s accounts receivable which the then Chapter 11 debtor assigned to Colorchrome as security for Colorchrome’s…”
— 11 U.S.C. § 364(b) — 1 case
Norris Square Civic Ass'n v. St. Mary Hosp. (In Re St. Mary Hosp.), 86 B.R. 393 (Bankr. E.D. Pa. 1988).
— 11 U.S.C. § 364(c) — 1 case
United States v. Motor Freight Express (In Re Motor Freight Express), 91 B.R. 705 (Bankr. E.D. Pa. 1988).
— 11 U.S.C. § 364(d) — 2 cases
In Re Sky Valley, Inc., 100 B.R. 107 (Bankr. N.D. Ga. 1988).
Roach Auto., L.P. v. Daimler Chrysler Fin. Servs. Americas, LLC (In re Roach Auto., L.P.), 540 B.R. 146 (Bankr. W.D. Pa. 2007).
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.