In Firstbase.io, Inc. v. Harbor Business Compliance Corporation, No. 24-04043, 2025 Bankr. LEXIS 1092 (Bankr. S.D.N.Y.), the U.S. Bankruptcy Court for the Southern District of New York found that a judgment execution lien arising under New York state law constituted an avoidable judicial lien—and not an unavoidable statutory lien—for purposes of the Bankruptcy Code's preference statute.
The ruling underscores a critical distinction in bankruptcy law between judicial liens and statutory liens and serves as a reminder of the careful scrutiny such liens face during the 90-day preference window preceding a bankruptcy filing.
Background
Harbor obtained a pre-petition judgment against Firstbase and delivered the judgment to the New York sheriff.
Under New York Civil Practice Law and Rules ("CPLR") § 5202(a), a judgment creditor—like Harbor—that has delivered an execution to a sheriff, obtains an "execution lien" or rights that "are superior to the extent of the amount of the execution to the rights of any transferee of the debt or property . . ."
After Harbor delivered the execution to the sheriff, Firstbase filed for bankruptcy within 90 days, filed a complaint against Harbor and argued, among other things, that Harbor's execution lien was a judicial lien that was avoidable as a preference under 11 U.S.C. § 547. Harbor countered that its execution lien was a statutory lien that was not subject to avoidance.
Preference Law Basics
Under section 547(b) of the Bankruptcy Code, a debtor may avoid a transfer made to a creditor, on account of antecedent debt, made while the debtor is insolvent, within 90 days of the bankruptcy filing, and which allows the creditor to receive more than it would in a Chapter 7 liquidation.
However, under section 547(c)(6) of the Bankruptcy Code, a debtor may not avoid the "fixing of a statutory lien . . . under section 545."
Section 101(53) defines a "statutory lien" to be a "lien arising solely by force of statute on specified circumstances or conditions" and expressly excludes a judicial lien. Section 101(36) of the Bankruptcy Code defines a "judicial lien" to be a "lien obtained by judgment, levy, . . . or other legal or equitable process or proceeding."
Because "a statutory lien cannot be a judicial lien," only a statutory lien falls with section 547(c)(6)'s safe harbor.
Judicial vs. Statutory Lien
The court ultimately ruled that the CPLR 5202 execution lien was a judicial lien—not a statutory lien—and could be avoided as a preferential transfer under section 547 of the Bankruptcy Code.
The court initially observed that the issue of whether a CPLR 5202 lien constitutes a judicial or statutory lien "has not been directly decided by a Court in the Second Circuit." The court further noted that "[other] courts in the Second Circuit have found that the execution of a lien on personal property under NY CPLR § 5202(a) is a transfer which can be avoided under section 547 of the Bankruptcy Code."
Moreover, the CPLR 5202 lien "is clearly based on ... judicial action" and "[i]f there had not been 'judicial action' taken by the [court] issuing a monetary judgment in [Harbor]'s favor, then there would not and could not be a lien under New York law." The court observed that a judicial lien differs from other statutory liens—such as a mechanics lien—"which arises automatically under New York law . . ."
Accordingly, the execution lien fit squarely within the definition of a judicial lien under the Bankruptcy Code and was, therefore, avoidable as a preference.
Broader Implications
This decision sends a clear message to judgment creditors: liens obtained via execution shortly before a bankruptcy filing—even if appearing to arise "automatically" under state law—will often be viewed as judicial and thus subject to avoidance under federal bankruptcy law.
For debtors and trustees, the ruling reaffirms the importance of analyzing the origin of a lien, not merely its label under state law. For creditors, it underscores the risks of waiting too long to enforce judgments and the perils of relying on state procedural rules to protect what are, in federal bankruptcy terms, preferential transfers.
In short, when a bankruptcy filing looms, execution liens are far from bulletproof.
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