When Congress enacted the 1978 Bankruptcy Code, two competing groups of lawyers and academics squared off: those who favored restructuring opportunities for debtors by restricting the scope of secured lender rights and remedies; and those who favored the expansion and protection of commercial lending laws.
ABI Bankruptcy Reform
Tension has focused on whether to allow a secured creditor to improve its position with new property acquired after the bankruptcy case. The result was the broad mandate of Section 552 of the Bankruptcy Code: A prepetition lender with a lien on an asset enjoys a post-petition lien on the proceeds of that asset.
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