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Using ' 552(a) to Invalidate a Lender's Security Interest in Proceeds of an FCC License

By Thomas F. Blakemore and Gregory A. Martin

Recently, a Colorado bankruptcy court considered the effects of Bankruptcy Code ' 552(a) on a lender's security interest in the proceeds of an FCC broadcast license. The court held that a prepetition security interest would not extend to proceeds received from a post-petition transfer of the debtor's FCC license because the debtor did not have an attachable, prepetition property interest in the proceeds. Because a security interest does not extend to the underlying broadcast license, no interest in the proceeds of the license may arise until the FCC approves an agreement to sell the license. As no such sale was contemplated prepetition, ' 552(a) prevented the lender's security interest from attaching the proceeds of a post-petition sale.

The Case

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