Using § 552(a) to Invalidate a Lender’s Security Interest in Proceeds of an FCC License

Reprinted with permission from the May 2011 edition of the Law Journal Newsletters. © 2011 ALM Media Properties, LLC. All rights reserved.

Recently, a Colorado bankruptcy court considered the effects of Bankruptcy Code § 552(a) on a lender’s security interest in the proceeds of an FCC broadcast license. The court held that a prepetition security interest would not extend to proceeds received from a post-petition transfer of the debtor’s FCC license because the debtor did not have an attachable, prepetition property interest in the proceeds. Because a security interest does not extend to the underlying broadcast license, no interest in the proceeds of the license may arise until the FCC approves an agreement to sell the license.