Legal Question in Bankruptcy in Missouri
Chapter 11, lein on pre-petition products
My company filed chapter 11 bankruptcy. A vendor sold us product for our inventory. We sold the product in the normal course of business. After the bankruptcy was filed the vendor had been notified by the bankruptcy court of the ''stay of execution'' but he still filed a lein against the end user of the product. With that lein filing the person we sold the product to has refused to pay us until the lein has been dropped. Our bankruptcy plan has since been confirmed and the bankruptcy discharged with appropriate notice to the vendor. Is his lein valid??
1 Answer from Attorneys
Re: Chapter 11, lein on pre-petition products
Thanks for your question. A lien stands as security for an obligation (usually promise to pay). If the obligation to pay was discharged by bankruptcy, the lien would be normally discharged by that fact. There would no longer be a debt to secure. I suggest you speak with your bankruptcy attorney for a more definite answer. The bankruptcy could be reopened for the purpose of 1. avoidance of the lien, and 2. for possible sanctions against the creditor for filing the same after notice of bankruptcy. The creditor might voluntarily relinquish the lien if he were approached about the matter and understood the ramifications of not releasing the lien.
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