Section 1110 for GPUs

Section 1110 of the U.S. Bankruptcy Code lets an aircraft lender or lessor take its planes back 60 days after an airline files for bankruptcy, unless the airline agrees to keep paying and cures its defaults. ^{[1]11 U.S. Code Section 1110: aircraft equipment and vessels, with historical and revision noteshttps://www.law.cornell.edu/uscode/text/11/1110} Ship financiers get the same right, and railcar financiers get it under Section 1168. ^{[2]11 U.S. Code Section 1168: rolling stock equipmenthttps://www.law.cornell.edu/uscode/text/11/1168} GPU lenders get nothing comparable.

A GPU lender waits out the automatic stay for as long as the case runs. Fitch found the median traditional Chapter 11 took 11 months from petition to plan confirmation, against 4 months for pre-arranged cases and 2 for prepackaged ones. ^{[3]American Bankruptcy Institute, "The Ever-Shrinking Chapter 11 Case," summarizing Fitch Ratings (August 2018)https://www.abi.org/feed-item/the-ever-shrinking-chapter-11-case} How the stay works for a GPU lender is in what happens to GPUs when a neocloud goes bankrupt.

What Section 1110 does

Section 1110 overrides the rest of the Bankruptcy Code for a narrow class of financiers. Their right to repossess "is not limited or otherwise affected by any other provision of this title or by any power of the court." ^{[1]11 U.S. Code Section 1110: aircraft equipment and vessels, with historical and revision noteshttps://www.law.cornell.edu/uscode/text/11/1110}

The airline keeps the aircraft past day 60 only if it does two things:

1. Agrees to perform. With court approval, it agrees to perform every obligation under the lease or loan.
2. Cures defaults. It cures pre-filing defaults by day 60, and later defaults on a set schedule. Defaults triggered only by the bankruptcy itself need no cure.

The parties can agree to extend the 60 days with court approval. If the airline does neither, it must surrender the aircraft on demand. ^{[1]11 U.S. Code Section 1110: aircraft equipment and vessels, with historical and revision noteshttps://www.law.cornell.edu/uscode/text/11/1110} Congress said in 1978 that the stay applies during the 60 days and that "no right to reduce the period is intended."

How it played out for airlines

Section 1110 forces a fleet decision within 60 days, while the rest of the case takes years.

American shows the mechanism. Inside the 60 days it signed Section 1110(a) agreements to keep 350 aircraft, and by February 2012 it had rejected 33 aircraft leases and mortgages, mostly older MD-80s and 757s. ^{[7]AMR Corporation, Form 10-K for fiscal 2011: Section 1110 agreements and rejected aircraft (filed February 15, 2012)https://www.sec.gov/Archives/edgar/data/6201/000119312512063516/d259681d10k.htm} For the planes it kept, American had to perform the existing contracts and cure its defaults. Financiers of the planes it did not want got them back.

United took a third path in 2003. It negotiated stay extensions with many financiers, in some cases for specified payments, and stopped paying on some aircraft without agreeing to cure. ^{[5]UAL Corporation, Form 10-K for fiscal 2002: Section 1110 period and aircraft financier agreementshttps://www.sec.gov/Archives/edgar/data/100517/000010051703000007/ual.htm} The extension is where most of the bargaining happens.

Why Congress wrote it

The point is cheaper credit. The Seventh Circuit put it plainly in 2005: the prospect of repossession "makes credit available on better terms when air carriers shop for financing in the first place." ^{[9]United Air Lines, Inc. v. U.S. Bank N.A., 406 F.3d 918 (7th Cir. May 6, 2005)https://www.courtlistener.com/opinion/790124/united-airlines-inc-v-bank/}

Certain repossession lowers loss given default, which supports higher advance rates and lower spreads. Rail protections are older still, dating to Section 77(j) of the 1898 Bankruptcy Act, which Section 1168 continues. ^{[2]11 U.S. Code Section 1168: rolling stock equipmenthttps://www.law.cornell.edu/uscode/text/11/1168}

The rest of the world copied the idea. The Cape Town Convention's Aircraft Protocol has 87 contracting states plus the EU. ^{[10]UNIDROIT, status of the Protocol to the Cape Town Convention on matters specific to aircraft equipment (accessed October 2026)https://www.unidroit.org/instruments/security-interests/aircraft-protocol/status/} Of the states that adopted an insolvency regime under it, nearly all chose "Alternative A," a fixed waiting period after which the airline must cure or hand over the aircraft, most often 60 days. ^{[11]UNIDROIT, declarations deposited under Article XXX(3) of the Aircraft Protocol (insolvency alternatives)https://www.unidroit.org/instruments/security-interests/aircraft-protocol/depositary/declarations-deposited-under-the-protocol-to-the-cape-town-convention-on-international-interests-in-mobile-equipment-on-matters-specific-to-aircraft-equipment-arranged-by-article/article-xxx3/} The U.S. kept Section 1110 as its version.

The Cape Town discount

Under the 2011 OECD Aircraft Sector Understanding, export credit agencies cut the minimum premium by up to 10% for aircraft financed into states that ratified Cape Town and made its qualifying declarations. ^{[12]Aviation Working Group, summary of the 2011 OECD Aircraft Sector Understanding, including the Cape Town Discounthttps://awg.aero/wp-content/uploads/2019/09/ASU-Summary-2011.pdf}

One study, cited in a 2016 UNIDROIT presentation, estimated that cutting repossession time after default from ten months to two would save $161 billion in aircraft financing costs over 2009 to 2030. ^{[13]Charles W. Mooney, Jr., presentation to UNIDROIT citing Linetsky (2009) on the economic benefits of the Cape Town Convention (December 2, 2016)https://www.unidroit.org/english/documents/2016/study72k/pm1/s-72k-pm01-mooney-pres-e.pdf} Rail manufacturers were still asking the OECD for the same discount on trains in June 2026. ^{[14]Stadler, letter to OECD export credit agencies on a Cape Town Discount for rolling stock (June 5, 2026)https://www.railworkinggroup.org/wp-content/uploads/2026/06/OECD-letter-Stadler.pdf}

Cape Town does not reach computers

The newest Cape Town protocol, adopted in Pretoria in 2019, covers mining, agricultural and construction equipment. Its scope is a list of 56 Harmonized System (HS) customs codes for earthmovers, tractors, cranes and similar machines. ^{[15]UNIDROIT, MACPC/5/Doc. 4: the 56 Harmonized System codes defining the MAC Protocol scope (October 2022)https://www.unidroit.org/wp-content/uploads/2022/11/MACPC5-Doc.-4-2022-Revision-of-the-Harmonized-System.pdf} HS 8471, the code for data processing machines including servers, is not on it, nor is 8473 for their parts.

That protocol is not yet in force either. It needs five ratifications and had two as of June 2026. ^{[16]UNIDROIT, status of the MAC Protocol (mining, agricultural and construction equipment), accessed October 2026https://www.unidroit.org/instruments/security-interests/mac-protocol/status/} The Rail Protocol, adopted in 2007, took until March 2024. ^{[17]UNIDROIT, status of the Luxembourg Rail Protocol (in force March 8, 2024)https://www.unidroit.org/instruments/security-interests/rail-protocol/status/}

Does the aircraft analogy hold

Partly. GPUs match aircraft on the features that make a repossession rule work, and differ on the features that made Congress comfortable writing one.

Fast depreciation is the strongest case for a GPU rule. Every month of stay costs a GPU lender more collateral value than it costs an aircraft lender.

The last row is the strongest case against. A neocloud whose lenders can pull every GPU on day 61 may have nothing left to reorganize. Section 1110 answers that objection the same way for airlines: the debtor keeps any asset it pays for, and loses only the option of keeping collateral for free.

What a GPU version would need

A GPU version would need the two pieces aircraft have: a lien registry searchable by serial number, like the International Registry for airframes and engines, and a 60-day perform-or-surrender rule for registered accelerators and the servers that hold them. The Cape Town Convention already allows new protocols for other categories of equipment. ^{[20]Convention on International Interests in Mobile Equipment (Cape Town, 2001), Article 51 on future protocolshttps://www.unidroit.org/wp-content/uploads/2021/07/Cape-Town-Convention_English.pdf}

The nearest thing in Congress is an export-control bill. The Chip Security Act would require location verification on export-controlled AI chips and computers, and the House Foreign Affairs Committee ordered it reported 42-0 on March 26, 2026. ^{[21]Chip Security Act, H.R. 3447, 119th Congress: ordered reported by the House Foreign Affairs Committee 42-0 (March 26, 2026)https://www.congress.gov/bill/119th-congress/house-bill/3447 [22]Chip Security Act, S. 1705, 119th Congress, as introduced (May 8, 2025)https://www.govinfo.gov/content/pkg/BILLS-119s1705is/html/BILLS-119s1705is.htm} It creates no ownership or lien registry.

Until a statute exists, GPU lenders rebuild parts of Section 1110 by contract: true leases for rent from day 60, serial-number UCC schedules, and access agreements with the colocation provider.

References

1. 11 U.S. Code Section 1110: aircraft equipment and vessels, with historical and revision notes
2. 11 U.S. Code Section 1168: rolling stock equipment
3. American Bankruptcy Institute, "The Ever-Shrinking Chapter 11 Case," summarizing Fitch Ratings (August 2018)
4. 11 U.S. Code Section 365: executory contracts and unexpired leases, including 365(d)(5)
5. UAL Corporation, Form 10-K for fiscal 2002: Section 1110 period and aircraft financier agreements
6. Delta Air Lines, Form 10-K for fiscal 2005: Section 1110 period expiry (November 14, 2005)
7. AMR Corporation, Form 10-K for fiscal 2011: Section 1110 agreements and rejected aircraft (filed February 15, 2012)
8. AMR Corporation, Form 8-K: plan effective date and merger with US Airways (December 9, 2013)
9. United Air Lines, Inc. v. U.S. Bank N.A., 406 F.3d 918 (7th Cir. May 6, 2005)
10. UNIDROIT, status of the Protocol to the Cape Town Convention on matters specific to aircraft equipment (accessed October 2026)
11. UNIDROIT, declarations deposited under Article XXX(3) of the Aircraft Protocol (insolvency alternatives)
12. Aviation Working Group, summary of the 2011 OECD Aircraft Sector Understanding, including the Cape Town Discount
13. Charles W. Mooney, Jr., presentation to UNIDROIT citing Linetsky (2009) on the economic benefits of the Cape Town Convention (December 2, 2016)
14. Stadler, letter to OECD export credit agencies on a Cape Town Discount for rolling stock (June 5, 2026)
15. UNIDROIT, MACPC/5/Doc. 4: the 56 Harmonized System codes defining the MAC Protocol scope (October 2022)
16. UNIDROIT, status of the MAC Protocol (mining, agricultural and construction equipment), accessed October 2026
17. UNIDROIT, status of the Luxembourg Rail Protocol (in force March 8, 2024)
18. Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, Article VII (text as scheduled to the Irish International Interests in Mobile Equipment Act 2005)
19. NVIDIA, "nvidia-smi documentation": serial number and UUID fields
20. Convention on International Interests in Mobile Equipment (Cape Town, 2001), Article 51 on future protocols
21. Chip Security Act, H.R. 3447, 119th Congress: ordered reported by the House Foreign Affairs Committee 42-0 (March 26, 2026)
22. Chip Security Act, S. 1705, 119th Congress, as introduced (May 8, 2025)