U.S. Code » Title 11 » Chapter CHAPTER 5— CREDITORS, THE DEBTOR, AND THE ESTATE › Subchapter SUBCHAPTER III— THE ESTATE

11 U.S.C. § 561

Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15

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(a) Subject to subsection (b), the exercise of any contractual right, because of a condition of the kind specified in section 365(e)(1), to cause the termination, liquidation, or acceleration of or to offset or net termination values, payment amounts, or other transfer obligations arising under or in connection with one or more (or the termination, liquidation, or acceleration of one or more)—(1) securities contracts, as defined in section 741(7);(2) commodity contracts, as defined in section 761(4);(3) forward contracts;(4) repurchase agreements;(5) swap agreements; or(6) master netting agreements,shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order of a court or administrative agency in any proceeding under this title.(b)(1) A party may exercise a contractual right described in subsection (a) to terminate, liquidate, or accelerate only to the extent that such party could exercise such a right under section 555, 556, 559, or 560 for each individual contract covered by the master netting agreement in issue.(2) If a debtor is a commodity broker subject to subchapter IV of chapter 7—(A) a party may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a) except to the extent that the party has positive net equity in the commodity accounts at the debtor, as calculated under such subchapter; and(B) another commodity broker may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract entered into or held on behalf of a customer of the debtor and traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a).(3) No provision of subparagraph (A) or (B) of paragraph (2) shall prohibit the offset of claims and obligations that arise under—(A) a cross-margining agreement or similar arrangement that has been approved by the Commodity Futures Trading Commission or submitted to the Commodity Futures Trading Commission under paragraph (1) or (2) of section 5c(c) of the Commodity Exchange Act and has not been abrogated or rendered ineffective by the Commodity Futures Trading Commission; or(B) any other netting agreement between a clearing organization (as defined in section 761) and another entity that has been approved by the Commodity Futures Trading Commission.(c) As used in this section, the term “contractual right” includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof, and a right, whether or not evidenced in writing, arising under common law, under law merchant, or by reason of normal business practice.(d) Any provisions of this title relating to securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements, or master netting agreements shall apply in a case under chapter 15, so that enforcement of contractual provisions of such contracts and agreements in accordance with their terms will not be stayed or otherwise limited by operation of any provision of this title or by order of a court in any case under this title, and to limit avoidance powers to the same extent as in a proceeding under chapter 7 or 11 of this title (such enforcement not to be limited based on the presence or absence of assets of the debtor in the United States).(Added Pub. L. 109–8, title IX, § 907(k)(1), Apr. 20, 2005, 119 Stat. 179.)Editorial NotesReferences in Text

The Commodity Exchange Act, referred to in subsecs. (b)(2) and (c), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. Section 5c(c) of the Act is classified to section 7a–2(c) of Title 7. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.

The Federal Deposit Insurance Corporation Improvement Act of 1991, referred to in subsec. (c), is Pub. L. 102–242, Dec. 19, 1991, 105 Stat. 2236. For complete classification of this Act to the Code, see Short Title of 1991 Amendment note set out under section 1811 of Title 12, Banks and Banking, and Tables.

Statutory Notes and Related SubsidiariesEffective Date

Section effective 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 of Pub. L. 109–8, set out as an Effective Date of 2005 Amendment note under section 101 of this title.

Notes of Decisions
Cited in 28 cases (2 in the last 5 years), 1942–2025 · leading case: Fairfield Sentry Ltd. v. Theodoor GGC Amsterdam (In re Fairfield Sentry Ltd.), 596 B.R. 275 (Bankr. S.D.N.Y. 2018).
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Fairfield Sentry Ltd. v. Theodoor GGC Amsterdam (In re Fairfield Sentry Ltd.), 596 B.R. 275 (Bankr. S.D.N.Y. 2018). · cites it 3× “11 U.S.C. § 561 (d) (emphasis added) (the concluding, italicized parenthetical is referred to as the "Enforcement Parenthetical").”
In Re Lehman Bros. Holdings, Inc., 433 B.R. 101 (Bankr. S.D.N.Y. 2010). “11 U.S.C. § 561 (a) (emphasis added). By their plain terms, these safe harbor provisions do not alter the axiomatic principle of bankruptcy law, codified in section 553, requiring mutuality in order to exercise a right of setoff.”
Meredith v. Thralls, 144 F.2d 473 (2d Cir. 1944). · cites it 2× “All of the appellants have appealed from the order of February 4, 1944, which dismissed objections made at the hearing held pursuant to sections 161 and 162 of the Bankruptcy Act, 11 U.S.C.A. §§ 561 , 562, and continued Mr.”
Lawrence v. TPG Capital Mgmt., L.P. (In re Hellas Telecomm. (Luxembourg) II SCA ), 526 B.R. 499 (Bankr. S.D.N.Y. 2015). “(MTD at 39-42 (citing 11 U.S.C. § 561 (d)).) According to the Movants, the definition of a “settlement payment” is broadly construed and includes redemption payments made in the nature of the December 2006 CPEC Redemption payments at issue.”
In Re Lehman Bros. Inc., 458 B.R. 134 (Bankr. S.D.N.Y. 2011). “11 U.S.C. § 561 (a). As this Court noted in Swedbank, the safe harbors permit the exercise of a contractual right of offset in connection with swap agreements, notwithstanding the operation of any provision of the Bankruptcy Code that could operate to stay, avoid or otherwise…”
Sass ex rel. Am. Home Mortg. Plan Trust v. Barclays Bank PLC (In re Am. Home Mortg., Holdings, Inc.), 501 B.R. 44 (Bankr. D. Del. 2013). “at 141 ("SemCrude held that a right to triangular setoff set forth in a contract does not create mutuality for purposes of section 553, and that there is no contract exception to section 553.”
Duggan v. Sansberry, 327 U.S. 499 (1946). “9 Section 161, 11 U. S. C. § 561 , reads: “The judge shall fix a time of hearing, to be held not less than thirty days and not more than sixty days after the approval of the petition, of which hearing at least thirty days’ notice shall be given by mail to the creditors,…”
Hutson v. Smithfield Packing Co. (In Re Nat'l Gas Distributors, LLC), 369 B.R. 884 (Bankr. E.D.N.C. 2007). “§ 560 , bankruptcy default clauses are enforceable, 11 U.S.C. § 561 (a), and there are special provisions for rejection damages.”
In Re S. Land Title Corp., 301 F. Supp. 379 (E.D. La. 1968). “On June 5, 1967, we set the hearing under § 161, 11 U.S.C. § 561 , for July 10, 1967, and set the hearing under § 144, 11 U.”
In re Plaza Towers, Inc., 294 F. Supp. 714 (E.D. La. 1967). “On February 23, 1967, the Court, pursuant to § 141 of the Bankruptcy Act, preliminarily approved the petition for reorganization, appointed a trustee for the debtor, and ordered that a hearing pursuant to § 161 of the Bankruptcy Act, 2 11 U.S.C.A. § 561 , be held on April…”
In re Marine Harbor Props., Inc., 125 F.2d 296 (2d Cir. 1942). “The trustee’s claim that it can arbitrarily restrict the certificate-holders to the state court proceeding is especially surprising since, so far as appears, the trustee has given them no notice of the present action, and since, in the Chapter X proceeding to which the trustee (…”
In Re Fairfield Sentry Ltd. (2d Cir. 2025). · cites it 6× “” 11 U.S.C. § 561 (d). This language would not make sense if, as the liquidators contend, the safe harbor applies directly to a case under Chapter 7 or 11 in which a foreign representative has intervened.”
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