Avoided lien is an asset of the bankruptcy estate

In Re: Brandon B. Ellis
Chapter 7 Decision Date: 1/7/2011
Idaho Bankruptcy Case No. 08-41299-JDP
The chapter 7 Trustee avoided a lender's deed of trust on debtor's home as an unauthroized post-petition transfer. Debtors treated the avoided lien as valid making all required loan payments. Trustee motioned the debtors to turn over possession of the house with the intent to sell the house for creditors benefit. Debtors objected and claimed a homestead exemption.
The Court found that when a trustee avoids a creditor's lien on an estate asset the lien is automatically preserved for the benefit of the creditors, and the trustee succeeds to the rights and interests that the divested creditor held in the lien. The debtors in this case were ordered to turn over the house to the Trustee for sale.
Full decision available at: http://www.id.uscourts.gov/cfCourt/Decisions/BK_DecisionIndex.cfm