Section 108(c) Tolls the Expiration of a Lien, Ninth Circuit Holds over a Dissent

Drawing on two of its own precedents, a divided panel of the Ninth Circuit held that the tolling provisions in Section 108(c) prevent a lien on personal property from expiring during the pendency of a bankruptcy case under a unique California law. Section 108(c) extended the duration of the lien, even though the creditor evidently could have extended the lien by filing a notice under Section 546(b)(2). A creditor held an unsatisfied money judgment. Under California law, the creditor obtained an Order for Appearance and Examination, or ORAP, requiring the judgment debtor to appear for an examination. By serving the order on the debtor, the California statute gave the creditor a one-year lien on the debtor’s personal property. The lien was a secret lien in the sense that another creditor would only be aware of the lien by searching for lawsuits against the debtor and reading the individual dockets. Before the one-year lien expired, the debtor filed a chapter 7 petition. The creditor filed a timely proof of claim.

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