The Bankruptcy Act gives the trustee, as of the date of bankruptcy,the rights of a lien creditor whether or not such creditors actually exist." Yet, the rights of such a lien creditor and his status relative to other conflicting interests are determined by state law. Under Tennessee law encumbrances on automobiles, other than liens dependent on possession, must be noted on the certificate of title to be valid against creditors, purchasers or encumbrancers in the absence of actual knowledge.' In the instant case, although the encumbrance was noted on the bill of sale, it was not noted on the title since the buyer never applied for a new title. Therefore, the court held that the lien was not valid against the trustee as a lien creditor.
Forrest W. Lacey,
Creditor's Rights and Security Transactions -- 1964 Tennessee Survey,
18 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol18/iss3/13