Automatic preservation of avoided transfer

U.S.C. Title 11 - BANKRUPTCY 11 U.S.C. United States Code, 2023 Edition Title 11 - BANKRUPTCY CHAPTER 5 - CREDITORS, THE DEBTOR, AND THE ESTATE SUBCHAPTER III - THE ESTATE Sec. 551 - Automatic preservation of avoided transfer From the U.S. Government Publishing Office, www.gpo.gov

§551. Automatic preservation of avoided transfer

Any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of this title, or any lien void under section 506(d) of this title, is preserved for the benefit of the estate but only with respect to property of the estate.

(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2602.)

Historical and Revision Notes legislative statements Section 551 is adopted from the House bill and the alternative in the Senate amendment is rejected. The section is clarified to indicate that a transfer avoided or a lien that is void is preserved for the benefit of the estate, but only with respect to property of the estate. This prevents the trustee from asserting an avoided tax lien against after acquired property of the debtor.

senate report no. 95–989 This section is a change from present law. It specifies that any avoided transfer is automatically preserved for the benefit of the estate. Under current law, the court must determine whether or not the transfer should be preserved. The operation of the section is automatic, unlike current law, even though preservation may not benefit the estate in every instance. A preserved lien may be abandoned by the trustee under proposed 11 U.S.C. 554 if the preservation does not benefit the estate. The section as a whole prevents junior lienors from improving their position at the expense of the estate when a senior lien is avoided.