Liens and Liquidation: Preferences, Strong Arm Clause, Fraudulent Transfers, Equitable Subordination, Priorities and Other Limitations on Liens Claims

Litigation arising out of vessel arrests and overlapping bankruptcy actions has presented a number of new and challenging questions in the field of maritime creditors' rights. These problems are of particular concern to admiralty practitioners who suddenly find themselves immersed in the unfamiliar intricacies of the Bankruptcy Code. This article addresses two broad areas in which the bankruptcy law most directly affects maritime creditors: (1) the power of the trustee to set aside transfers and (2) the treatment of maritime liens as secured claims in bankruptcy. Curiously, aside from commentary on the jurisdictional issues, little has been written on these subjects in either admiralty or bankruptcy texts. It is assumed for purposes of this discussion that the bankruptcy court has won whatever jurisdictional battle may have been fought with an admiralty court over the issue, that reorganization of the debtor is not an option, and that the bankruptcy court is exercising its powers over core proceedings to adjudicate maritime liens and liquidate maritime assets. Nevertheless, admiralty practitioners will be happy to discover that maritime liens are generally treated with great respect by the bankruptcy courts and are dealt with according to time-honored admiralty law principles.