Lien Avoidance

The avoidance of a lien or security interest by a trustee or debtor as a preferential or fraudulent transfer or under the strong arm powers under the Code. A misnomer in that the affected lien is not “avoided” but, instead, is transferred to the debtor or trustee for the benefit of the bankruptcy estate. Thus, the value of the lien is preserved for the estate as a whole rather than simply allowing a junior secured creditor to improve its priority position following avoidance of the lien.

Bankruptcy Code §§ 544, 547, 548, 551. See also Avoidance Action, Fraudulent Transfer, Preference, Strong Arm Powers.

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