If you find yourself in the situation where you have provided services to, or stored, an aircraft but you haven’t been paid, and then your customer (usually the aircraft owner or operator) files for bankruptcy, what do you do? Can you still assert a mechanic lien against the aircraft? Well, the lawyerly answer is, “it depends.”
In the absence of a bankruptcy filing, we know that in most states a lien claimant can, and in fact must, file a mechanic lien statement with the FAA Registry in order for the lien to be effective against any third parties. (In a handful of states a lien may only be asserted against an aircraft as long as it is in the service provider’s possession, and the FAA Registry won’t accept a lien statement from those states.)
However, once a bankruptcy case is filed, an “automatic stay” arises under Section 362(a)(4) of the Bankruptcy Code which prevents any creditor (the party owed money) of the debtor (the party who filed for bankruptcy) from taking any action to collect on the debt (the money owed by the debtor to the creditor). If a creditor violates the automatic stay, the creditor could be subject to monetary and other sanctions imposed by the bankruptcy court.
So, if a mechanic lien claimant finds itself in that situation, it is important to understand whether filing a mechanic lien statement with the FAA Registry will violate the automatic stay. This is determined by the state law under which the mechanic lien arises.
If the statute says the lien is not created or effective until it the lien statement is filed (with the FAA and/or another local branch of government), then filing the mechanic lien statement after the bankruptcy case has been initiated violates the automatic stay. Since the filing is necessary to create the lien in that circumstance, the court views the filing as an action to collect on the debt and it may then declare the lien void.
If the statute says the lien arises prior to filing the mechanic lien statement (with the FAA and/or another local branch of government) and the filing is simply required to perfect the lien, then filing the mechanic lien statement after the bankruptcy case has been initiated would not violate the automatic stay. In that situation the court views the filing not as an action to collect on a debt, but rather simply as a requirement for the lien claimant to preserve an existing claim.
It is always unfortunate when an aircraft owner or operator does not pay for services provided to it. While a subsequent bankruptcy filing complicates matters, it does explain why the bill wasn’t paid. If you find yourself in that situation, make sure you understand what you can and cannot do to protect yourself, preserve your rights, and put yourself in the best possible position to get paid. As always, I am happy to assist if you find yourself in this unenviable position.