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§ 724. Treatment of cer­tain liens

(a) Avoidance of liens for pen­al­ties

(b) Subordination of tax claims

(c) Distribution among mul­ti­ple claims

(d) Treatment of cer­tain stat­u­to­ry liens

(e) Requirements for sub­or­di­na­tion of tax claims un­der 724(b)

(f) Subordination of ad va­lo­rem tax liens

(a) The trust­ee may avoid a lien that se­cures a claim of a kind spe­ci­fied in sec­tion 726(a)(4) of this ti­tle.

(b) Prop­er­ty in which the es­tate has an in­ter­est and that is sub­ject to a lien that is not avoid­able un­der this ti­tle (oth­er than to the ex­tent that there is a prop­erly per­fect­ed un­avoid­able tax lien aris­ing in con­nec­tion with an ad va­lo­rem tax on real or per­son­al prop­er­ty of the es­tate) and that se­cures an al­lowed claim for a tax, or pro­ceeds of such prop­er­ty, shall be dis­trib­uted—

(1) first, to any hold­er of an al­lowed claim se­cured by a lien on such prop­er­ty that is not avoid­able un­der this ti­tle and that is se­nior to such tax lien;

(2) second, to any hold­er of a claim of a kind spe­ci­fied in sec­tion 507(a)(1)(C) or 507(a)(2) (ex­cept that such ex­penses under each such section, oth­er than claims for wages, sal­a­ries, or com­mis­sions that arise af­ter the date of the fil­ing of the pe­ti­tion, shall be lim­ited to ex­penses in­curred un­der this chap­ter and shall not in­clude ex­penses in­curred un­der chap­ter 11 of this ti­tle), 507(a)(1(A), 507(a)(1)(B), 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of this ti­tle, to the ex­tent of the amount of such al­lowed tax claim that is se­cured by such tax lien;

(3) third, to the hold­er of such tax lien, to any ex­tent that such hold­er's al­lowed tax claim that is se­cured by such tax lien ex­ceeds any amount dis­trib­uted un­der par­a­graph (2) of this sub­sec­tion;

(4) fourth, to any hold­er of an al­lowed claim se­cured by a lien on such prop­er­ty that is not avoid­able un­der this ti­tle and that is junior to such tax lien;

(5) fifth, to the hold­er of such tax lien, to the ex­tent that such hold­er's al­lowed claim se­cured by such tax lien is not paid un­der par­a­graph (3) of this sub­sec­tion; and

(6) sixth, to the es­tate.

(c) If more than one hold­er of a claim is en­ti­tled to dis­tri­bu­tion un­der a par­tic­u­lar par­a­graph of sub­sec­tion (b) of this sec­tion, dis­tri­bu­tion to such hold­ers un­der such par­a­graph shall be in the same or­der as dis­tri­bu­tion to such hold­ers would have been oth­er than un­der this sec­tion.

(d) A stat­u­to­ry lien the pri­or­i­ty of which is de­ter­mined in the same man­ner as the pri­or­i­ty of a tax lien un­der sec­tion 6323 of the In­ter­nal Rev­e­nue Code of 1986 shall be treat­ed un­der sub­sec­tion (b) of this sec­tion the same as if such lien were a tax lien.

(e) Be­fore sub­or­di­nat­ing a tax lien on real or per­son­al prop­er­ty of the es­tate, the trust­ee shall—

(1) ex­haust the un­en­cum­bered as­sets of the es­tate; and

(2) in a man­ner con­sis­tent with sec­tion 506(c), re­cov­er from prop­er­ty se­cur­ing an al­lowed se­cured claim the rea­son­able, nec­es­sary costs and ex­penses of pre­serv­ing or dis­pos­ing of such prop­er­ty.

(f) Not­with­stand­ing the ex­clu­sion of ad va­lo­rem tax liens un­der this sec­tion and sub­ject to the re­quire­ments of sub­sec­tion (e), the fol­low­ing may be paid from prop­er­ty of the es­tate which se­cures a tax lien, or the pro­ceeds of such prop­er­ty:

(1) Claims for wages, sal­a­ries, and com­mis­sions that are en­ti­tled to pri­or­i­ty un­der sec­tion 507(a)(4).

(2) Claims for con­tri­bu­tions to an em­ploy­ee ben­e­fit plan en­ti­tled to pri­or­i­ty un­der sec­tion 507(a)(5).

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2607; Pub. L. 98-353, ti­tle III, § 477, July 10, 1984, 98 Stat. 381; Pub. L. 99-554, ti­tle II, § 283(r), Oct. 27, 1986, 100 Stat. 3118; Pub. L. 103-394, ti­tle III, § 304(h)(4), ti­tle V, § 501(d)(23), Oct. 22, 1994, 108 Stat. 4134, 4146; Pub. L. 109-8, Title VII, § 701(a), April 20, 2005, 119 Stat. 124; Pub. L. 111-327, § 2(a)(27), Dec. 22, 2010, 124 Stat. 3560.)

HISTORICAL AND REVISION NOTES (11 U.S.C. § 724)