Is it an Interest in Property or a Lien? The Misapplication of the Federal Bankruptcy Code in North Carolina Bankruptcy Court and the Legal Implication in Construction Practice

Abstract

The Eastern District of North Carolina erred in its conclusions that the creditors in Shearin and Harrelson did not fall within the scope of the exception described in sections 362(b)(3) and 546(b) of the Bankruptcy Code. The term “interest in property,” as used in section 362(b)(3), is broader than the term “lien.” The Leonard and Small Courts spent much time dissecting the terms of Chapter 44A and analyzing whether a lien is created instantly upon delivery or if it is only created upon filing and perfecting a lien. Most courts hold that once entitlement to a lien has been established, statutory requirements concerning perfection are to be liberally construed in favor of the lien claimant. When drafting the Bankruptcy Code and creating the exception to the automatic stay under sections 362(b)(3) and 546(b) Congress did not use the term “lien.” Rather, Congress elected to use the word “interest in property.” Both cases should turn on the definition of “interest in property” and not the “lien” terminology used by both the Leonard and Small courts. This is because Congress is not shy in its use of the word “lien” throughout the Bankruptcy Code. As a matter of statutory construction, when Congress “includes particular language in one section of a statute, but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”