When a Statutory Lien Becomes a Secret Lien


The Bankruptcy Court for the Eastern District of New York recently decided in In re R.F. Cunningham & Co., Inc., 355 B.R. 408 (Bankr. EDNY 2006), in the context of a motion to lift the stay, that a statutory lien under Ohio law was susceptible to being avoided as a secret lien under §544(a)(1) of the Bankruptcy Code. Champaign Landmark, an Ohio vendor, was owed approximately $150,000 for grain picked up by the New York debtor. Pursuant to the Ohio statute, Champaign claimed it had a statutory lien on the grain sold and its proceeds and asked permission to enforce the lien against the debtor's assets. The debtor and the creditors committee opposed the motion and offered several reasons as grounds to deny it, chief of which was that the Ohio lien was a secret lien.

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