Pay Up or Surrender: The Seventh Circuit Puts Teeth Back into Section 1110

Originally published July/August 2005

The bankruptcy laws of the United States have long provided special benefits to those who lease, finance or conditionally sell transportation equipment such as airplanes, trains and related parts to companies that later file for bankruptcy protection. This special interest legislation reflects lawmakers' intent to offer enhanced protection and encouragement to transportation financiers based upon the perception that the uninterrupted availability of low-cost financing in the industry and the ability of financiers to gain immediate access to their collateral notwithstanding a bankruptcy filing are vital to the continued functioning of the national economy. In the case of the aviation industry, section 1110 of the Bankruptcy Code describes the circumstances under which a chapter 11 debtor-in-possession ("DIP") or bankruptcy trustee can continue to use qualifying aircraft, vessels and related equipment. A pair of rulings recently handed down by the