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Section 506 — Secured Creditors' Claims


Section 506 of the Bankruptcy Code governs secured claims against a debtor's estate, and allows debtors to void a lien to the extent it is unsupported by the value in the collateral. Section 506 provides in relevant part:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim.

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless -

(1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or

(2) such claim is not an allowed secured claim due only to the failure of any entity to le a proof of such claim under section 501 of this title.

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Reprinted from the Norton Annual Survey of Bankruptcy Law & Practice, 2015 Edition, with permission.  Copyright © 2015 Thomson Reuters/West.  For more information about this publication please visit