(a) In this section, ``cash collateral'' means cash, negotiable 
instruments, documents of title, securities, deposit accounts, or other 
cash equivalents whenever acquired in which the estate and an entity 
other than the estate have an interest and includes the proceeds, 
products, offspring, rents, or profits of property and the fees, 
charges, accounts or other payments for the use or occupancy of rooms 
and other public facilities in hotels, motels, or other lodging 
properties subject to a security interest as provided in section 552(b) 
of this title, whether existing before or after the commencement of a 
case under this title.
    (b)(1) The trustee, after notice and a hearing, may use, sell, or 
lease, other than in the ordinary course of business, property of the 
estate.
    (2) If notification is required under subsection (a) of section 7A 
of the Clayton Act in the case of a transaction under this subsection, 
then--
        (A) notwithstanding subsection (a) of such section, the 
    notification required by such subsection to be given by the debtor 
    shall be given by the trustee; and
        (B) notwithstanding subsection (b) of such section, the required 
    waiting period shall end on the 15th day after the date of the 
    receipt, by the Federal Trade Commission and the Assistant Attorney 
    General in charge of the Antitrust Division of the Department of 
    Justice, of the notification required under such subsection (a), 
    unless such waiting period is extended--
            (i) pursuant to subsection (e)(2) of such section, in the 
        same manner as such subsection (e)(2) applies to a cash tender 
        offer;
            (ii) pursuant to subsection (g)(2) of such section; or
            (iii) by the court after notice and a hearing.

    (c)(1) If the business of the debtor is authorized to be operated 
under section 721, 1108, 1203, 1204, or 1304 of this title and unless 
the court orders otherwise, the trustee may enter into transactions, 
including the sale or lease of property of the estate, in the ordinary 
course of business, without notice or a hearing, and may use property of 
the estate in the ordinary course of business without notice or a 
hearing.
    (2) The trustee may not use, sell, or lease cash collateral under 
paragraph (1) of this subsection unless--
        (A) each entity that has an interest in such cash collateral 
    consents; or
        (B) the court, after notice and a hearing, authorizes such use, 
    sale, or lease in accordance with the provisions of this section.

    (3) Any hearing under paragraph (2)(B) of this subsection may be a 
preliminary hearing or may be consolidated with a hearing under 
subsection (e) of this section, but shall be scheduled in accordance 
with the needs of the debtor. If the hearing under paragraph (2)(B) of 
this subsection is a preliminary hearing, the court may authorize such 
use, sale, or lease only if there is a reasonable likelihood that the 
trustee will prevail at the final hearing under subsection (e) of this 
section. The court shall act promptly on any request for authorization 
under paragraph (2)(B) of this subsection.
    (4) Except as provided in paragraph (2) of this subsection, the 
trustee shall segregate and account for any cash collateral in the 
trustee's possession, custody, or control.
    (d) The trustee may use, sell, or lease property under subsection 
(b) or (c) of this section only to the extent not inconsistent with any 
relief granted under section 362(c), 362(d), 362(e), or 362(f) of this 
title.
    (e) Notwithstanding any other provision of this section, at any 
time, on request of an entity that has an interest in property used, 
sold, or leased, or proposed to be used, sold, or leased, by the 
trustee, the court, with or without a hearing, shall prohibit or 
condition such use, sale, or lease as is necessary to provide adequate 
protection of such interest. This subsection also applies to property 
that is subject to any unexpired lease of personal property (to the 
exclusion of such property being subject to an order to grant relief 
from the stay under section 362).
    (f) The trustee may sell property under subsection (b) or (c) of 
this section free and clear of any interest in such property of an 
entity other than the estate, only if--
        (1) applicable nonbankruptcy law permits sale of such property 
    free and clear of such interest;
        (2) such entity consents;
        (3) such interest is a lien and the price at which such property 
    is to be sold is greater than the aggregate value of all liens on 
    such property;
        (4) such interest is in bona fide dispute; or
        (5) such entity could be compelled, in a legal or equitable 
    proceeding, to accept a money satisfaction of such interest.

    (g) Notwithstanding subsection (f) of this section, the trustee may 
sell property under subsection (b) or (c) of this section free and clear 
of any vested or contingent right in the nature of dower or curtesy.
    (h) Notwithstanding subsection (f) of this section, the trustee may 
sell both the estate's interest, under subsection (b) or (c) of this 
section, and the interest of any co-owner in property in which the 
debtor had, at the time of the commencement of the case, an undivided 
interest as a tenant in common, joint tenant, or tenant by the entirety, 
only if--
        (1) partition in kind of such property among the estate and such 
    co-owners is impracticable;
        (2) sale of the estate's undivided interest in such property 
    would realize significantly less for the estate than sale of such 
    property free of the interests of such co-owners;
        (3) the benefit to the estate of a sale of such property free of 
    the interests of co-owners outweighs the detriment, if any, to such 
    co-owners; and
        (4) such property is not used in the production, transmission, 
    or distribution, for sale, of electric energy or of natural or 
    synthetic gas for heat, light, or power.

    (i) Before the consummation of a sale of property to which 
subsection (g) or (h) of this section applies, or of property of the 
estate that was community property of the debtor and the debtor's spouse 
immediately before the commencement of the case, the debtor's spouse, or 
a co-owner of such property, as the case may be, may purchase such 
property at the price at which such sale is to be consummated.
    (j) After a sale of property to which subsection (g) or (h) of this 
section applies, the trustee shall distribute to the debtor's spouse or 
the co-owners of such property, as the case may be, and to the estate, 
the proceeds of such sale, less the costs and expenses, not including 
any compensation of the trustee, of such sale, according to the 
interests of such spouse or co-owners, and of the estate.
    (k) At a sale under subsection (b) of this section of property that 
is subject to a lien that secures an allowed claim, unless the court for 
cause orders otherwise the holder of such claim may bid at such sale, 
and, if the holder of such claim purchases such property, such holder 
may offset such claim against the purchase price of such property.
    (l) Subject to the provisions of section 365, trustee may use, sell, 
or lease property under subsection (b) or (c) of this section, or a plan 
under chapter 11, 12, or 13 of this title may provide for the use, sale, 
or lease of property, notwithstanding any provision in a contract, a 
lease, or applicable law that is conditioned on the insolvency or 
financial condition of the debtor, on the commencement of a case under 
this title concerning the debtor, or on the appointment of or the taking 
possession by a trustee in a case under this title or a custodian, and 
that effects, or gives an option to effect, a forfeiture, modification, 
or termination of the debtor's interest in such property.
    (m) The reversal or modification on appeal of an authorization under 
subsection (b) or (c) of this section of a sale or lease of property 
does not affect the validity of a sale or lease under such authorization 
to an entity that purchased or leased such property in good faith, 
whether or not such entity knew of the pendency of the appeal, unless 
such authorization and such sale or lease were stayed pending appeal.
    (n) The trustee may avoid a sale under this section if the sale 
price was controlled by an agreement among potential bidders at such 
sale, or may recover from a party to such agreement any amount by which 
the value of the property sold exceeds the price at which such sale was 
consummated, and may recover any costs, attorneys' fees, or expenses 
incurred in avoiding such sale or recovering such amount. In addition to 
any recovery under the preceding sentence, the court may grant judgment 
for punitive damages in favor of the estate and against any such party 
that entered into such an agreement in willful disregard of this 
subsection.

    (o) In any hearing under this section--
        (1) the trustee has the burden of proof on the issue of adequate 
    protection; and
        (2) the entity asserting an interest in property has the burden 
    of proof on the issue of the validity, priority, or extent of such 
    interest.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2572; Pub. L. 98-353, title III, 
Sec. 442, July 10, 1984, 98 Stat. 371; Pub. L. 99-554, title II, 
Sec. 257(k), Oct. 27, 1986, 100 Stat. 3115; Pub. L. 103-394, title I, 
Sec. 109, title II, Secs. 214(b), 219(c), title V, Sec. 501(d)(8), Oct. 
22, 1994, 108 Stat. 4113, 4126, 4129, 4144.)


                      Historical and Revision Notes

                         legislative statements

    Section 363(a) of the House amendment defines ``cash collateral'' as 
defined in the Senate amendment. The broader definition of ``soft 
collateral'' contained in H.R. 8200 as passed by the House is deleted to 
remove limitations that were placed on the use, lease, or sale of 
inventory, accounts, contract rights, general intangibles, and chattel 
paper by the trustee or debtor in possession.
    Section 363(c)(2) of the House amendment is derived from the Senate 
amendment. Similarly, sections 363(c)(3) and (4) are derived from 
comparable provisions in the Senate amendment in lieu of the contrary 
procedure contained in section 363(c) as passed by the House. The policy 
of the House amendment will generally require the court to schedule a 
preliminary hearing in accordance with the needs of the debtor to 
authorize the trustee or debtor in possession to use, sell, or lease 
cash collateral. The trustee or debtor in possession may use, sell, or 
lease cash collateral in the ordinary course of business only ``after 
notice and a hearing.''
    Section 363(f) of the House amendment adopts an identical provision 
contained in the House bill, as opposed to an alternative provision 
contained in the Senate amendment.
    Section 363(h) of the House amendment adopts a new paragraph (4) 
representing a compromise between the House bill and Senate amendment. 
The provision adds a limitation indicating that a trustee or debtor in 
possession sell jointly owned property only if the property is not used 
in the production, transmission, or distribution for sale, of electric 
energy or of natural or synthetic gas for heat, light, or power. This 
limitation is intended to protect public utilities from being deprived 
of power sources because of the bankruptcy of a joint owner.
    Section 363(k) of the House amendment is derived from the third 
sentence of section 363(e) of the Senate amendment. The provision 
indicates that a secured creditor may bid in the full amount of the 
creditor's allowed claim, including the secured portion and any 
unsecured portion thereof in the event the creditor is undersecured, 
with respect to property that is subject to a lien that secures the 
allowed claim of the sale of the property.


                        senate report no. 95-989

    This section defines the right and powers of the trustee with 
respect to the use, sale or lease of property and the rights of other 
parties that have interests in the property involved. It applies in both 
liquidation and reorganization cases.
    Subsection (a) defines ``cash collateral'' as cash, negotiable 
instruments, documents of title, securities, deposit accounts, or other 
cash equivalents in which the estate and an entity other than the estate 
have an interest, such as a lien or a co-ownership interest. The 
definition is not restricted to property of the estate that is cash 
collateral on the date of the filing of the petition. Thus, if ``non-
cash'' collateral is disposed of and the proceeds come within the 
definition of ``cash collateral'' as set forth in this subsection, the 
proceeds would be cash collateral as long as they remain subject to the 
original lien on the ``non-cash'' collateral under section 552(b). To 
illustrate, rents received from real property before or after the 
commencement of the case would be cash collateral to the extent that 
they are subject to a lien.
    Subsection (b) permits the trustees to use, sell, or lease, other 
than in the ordinary course of business, property of the estate upon 
notice and opportunity for objections and hearing thereon.
    Subsection (c) governs use, sale, or lease in the ordinary course of 
business. If the business of the debtor is authorized to be operated 
under Sec. 721, 1108, or 1304 of the bankruptcy code, then the trustee 
may use, sell, or lease property in the ordinary course of business or 
enter into ordinary course transactions without need for notice and 
hearing. This power is subject to several limitations. First, the court 
may restrict the trustee's powers in the order authorizing operation of 
the business. Second, with respect to cash collateral, the trustee may 
not use, sell, or lease cash collateral except upon court authorization 
after notice and a hearing, or with the consent of each entity that has 
an interest in such cash collateral. The same preliminary hearing 
procedure in the automatic stay section applies to a hearing under this 
subsection. In addition, the trustee is required to segregate and 
account for any cash collateral in the trustee's possession, custody, or 
control.
    Under subsections (d) and (e), the use, sale, or lease of property 
is further limited by the concept of adequate protection. Sale, use, or 
lease of property in which an entity other than the estate has an 
interest may be effected only to the extent not inconsistent with any 
relief from the stay granted to that interest's holder. Moreover, the 
court may prohibit or condition the use, sale, or lease as is necessary 
to provide adequate protection of that interest. Again, the trustee has 
the burden of proof on the issue of adequate protection. Subsection (e) 
also provides that where a sale of the property is proposed, an entity 
that has an interest in such property may bid at the sale thereof and 
set off against the purchase price up to the amount of such entity's 
claim. No prior valuation under section 506(a) would limit this bidding 
right, since the bid at the sale would be determinative of value.
    Subsection (f) permits sale of property free and clear of any 
interest in the property of an entity other than the estate. The trustee 
may sell free and clear if applicable nonbankruptcy law permits it, if 
the other entity consents, if the interest is a lien and the sale price 
of the property is greater than the amount secured by the lien, if the 
interest is in bona fide dispute, or if the other entity could be 
compelled to accept a money satisfaction of the interest in a legal or 
equitable proceeding. Sale under this subsection is subject to the 
adequate protection requirement. Most often, adequate protection in 
connection with a sale free and clear of other interests will be to have 
those interests attach to the proceeds of the sale.
    At a sale free and clear of other interests, any holder of any 
interest in the property being sold will be permitted to bid. If that 
holder is the high bidder, he will be permitted to offset the value of 
his interest against the purchase price of the property. Thus, in the 
most common situation, a holder of a lien on property being sold may bid 
at the sale and, if successful, may offset the amount owed to him that 
is secured by the lien on the property (but may not offset other amounts 
owed to him) against the purchase price, and be liable to the trustee 
for the balance of the sale price, if any.
    Subsection (g) permits the trustee to sell free and clear of any 
vested or contingent right in the nature of dower or curtesy.
    Subsection (h) permits sale of a co-owner's interest in property in 
which the debtor had an undivided ownership interest such as a joint 
tenancy, a tenancy in common, or a tenancy by the entirety. Such a sale 
is permissible only if partition is impracticable, if sale of the 
estate's interest would realize significantly less for the estate that 
sale of the property free of the interests of the co-owners, and if the 
benefit to the estate of such a sale outweighs any detriment to the co-
owners. This subsection does not apply to a co-owner's interest in a 
public utility when a disruption of the utilities services could result.
    Subsection (i) provides protections for co-owners and spouses with 
dower, curtesy, or community property rights. It gives a right of first 
refusal to the co-owner or spouse at the price at which the sale is to 
be consummated.
    Subsection (j) requires the trustee to distribute to the spouse or 
co-owner the appropriate portion of the proceeds of the sale, less 
certain administrative expenses.
    Subsection (k) [enacted as (l)] permits the trustee to use, sell, or 
lease property notwithstanding certain bankruptcy or ipso facto clauses 
that terminate the debtor's interest in the property or that work a 
forfeiture or modification of that interest. This subsection is not as 
broad as the anti-ipso facto provision in proposed 11 U.S.C. 541(c)(1).
    Subsection (l) [enacted as (m)] protects good faith purchasers of 
property sold under this section from a reversal on appeal of the sale 
authorization, unless the authorization for the sale and the sale itself 
were stayed pending appeal. The purchaser's knowledge of the appeal is 
irrelevant to the issue of good faith.
    Subsection (m) [enacted as (n)] is directed at collusive bidding on 
property sold under this section. It permits the trustee to void a sale 
if the price of the sale was controlled by an agreement among potential 
bidders. The trustees may also recover the excess of the value of the 
property over the purchase price, and may recover any costs, attorney's 
fees, or expenses incurred in voiding the sale or recovering the 
difference. In addition, the court is authorized to grant judgment in 
favor of the estate and against the collusive bidder if the agreement 
controlling the sale price was entered into in willful disregard of this 
subsection. The subsection does not specify the precise measure of 
damages, but simply provides for punitive damages, to be fixed in light 
of the circumstances.

                       References in Text

    Section 7A of the Clayton Act, referred to in subsec. (b)(2), is 
classified to section 18a of Title 15, Commerce and Trade.


                               Amendments

    1994--Subsec. (a). Pub. L. 103-394, Sec. 214(b), inserted ``and the 
fees, charges, accounts or other payments for the use or occupancy of 
rooms and other public facilities in hotels, motels, or other lodging 
properties'' after ``property''.
    Subsec. (b)(2). Pub. L. 103-394, Secs. 109, 501(d)(8)(A), struck out 
``(15 U.S.C. 18a)'' after ``Clayton Act'' and amended subpars. (A) and 
(B) generally. Prior to amendment, subpars. (A) and (B) read as follows:
    ``(A) notwithstanding subsection (a) of such section, such 
notification shall be given by the trustee; and
    ``(B) notwithstanding subsection (b) of such section, the required 
waiting period shall end on the tenth day after the date of the receipt 
of such notification, unless the court, after notice and hearing, orders 
otherwise.''
    Subsec. (c)(1). Pub. L. 103-394, Sec. 501(d)(8)(B), substituted 
``1203, 1204, or 1304'' for ``1304, 1203, or 1204''.
    Subsec. (e). Pub. L. 103-394, Sec. 219(c), inserted at end ``This 
subsection also applies to property that is subject to any unexpired 
lease of personal property (to the exclusion of such property being 
subject to an order to grant relief from the stay under section 362).''
    1986--Subsec. (c)(1). Pub. L. 99-554, Sec. 257(k)(1), inserted 
reference to sections 1203 and 1204 of this title.
    Subsec. (l). Pub. L. 99-554, Sec. 257(k)(2), inserted reference to 
chapter 12.
    1984--Subsec. (a). Pub. L. 98-353, Sec. 442(a), inserted ``whenever 
acquired'' after ``equivalents'' and ``and includes the proceeds, 
products, offspring, rents, or profits of property subject to a security 
interest as provided in section 552(b) of this title, whether existing 
before or after the commencement of a case under this title'' after 
``interest''.
    Subsec. (b). Pub. L. 98-353, Sec. 442(b), designated existing 
provisions as par. (1) and added par. (2).
    Subsec. (e). Pub. L. 98-353, Sec. 442(c), inserted ``, with or 
without a hearing,'' after ``court'' and struck out ``In any hearing 
under this section, the trustee has the burden of proof on the issue of 
adequate protection''.
    Subsec. (f)(3). Pub. L. 98-353, Sec. 442(d), substituted ``all liens 
on such property'' for ``such interest''.
    Subsec. (h). Pub. L. 98-353, Sec. 442(e), substituted ``at the time 
of'' for ``immediately before''.
    Subsec. (j). Pub. L. 98-353, Sec. 442(f), substituted 
``compensation'' for ``compenation''.
    Subsec. (k). Pub. L. 98-353, Sec. 442(g), substituted ``unless the 
court for cause orders otherwise the holder of such claim may bid at 
such sale, and, if the holder'' for ``if the holder''.
    Subsec. (l). Pub. L. 98-353, Sec. 442(h), substituted ``Subject to 
the provisions of section 365, the trustee'' for ``The trustee'', 
``condition'' for ``conditions'', ``or the taking'' for ``a taking'', 
and ``interest'' for ``interests''.
    Subsec. (n). Pub. L. 98-353, Sec. 442(i), substituted ``avoid'' for 
``void'', ``avoiding'' for ``voiding'', and ``In addition to any 
recovery under the preceding sentence, the court may grant judgment for 
punitive damages in favor of the estate and against any such party that 
entered into such an agreement in willful disregard of this subsection'' 
for ``The court may grant judgment in favor of the estate and against 
any such party that entered into such agreement in willful disregard of 
this subsection for punitive damages in addition to any recovery under 
the preceding sentence''.
    Subsec. (o). Pub. L. 98-353, Sec. 442(j), added subsec. (o).


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, 
but not applicable to cases commenced under this title before that date, 
see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under 
section 581 of Title 28, Judiciary and Judicial Procedure.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 106, 303, 361, 507, 541, 
542, 552, 553, 557, 1110, 1111, 1129, 1168, 1205, 1206, 1303, 1304 of 
this title.