## Facts

- David and Linda Taylor bought a Toyota Camry and financed the purchase with an $18,020 loan from USAA Federal Savings Bank secured by a vehicle lien.
- USAA perfected its security interest 21 days after the purchase; the timing was within Idaho’s 30-day vehicle-titling perfection window but outside the Bankruptcy Code’s then-20-day enabling-loan period in 11 U.S.C. § 547(c)(3).
- The Taylors filed a Chapter 7 bankruptcy case within 90 days of the lien perfection.
- The Chapter 7 trustee avoided the lien as a preferential transfer under 11 U.S.C. § 547(b).
- After avoidance, the lien was automatically preserved for the estate under 11 U.S.C. § 551.
- The bankruptcy court nevertheless entered a money judgment under 11 U.S.C. § 550(a) for the “value” of the avoided lien, setting that value at the full loan amount ($18,020) plus interest, and allowed USAA a matching unsecured claim.
- The Bankruptcy Appellate Panel affirmed; USAA appealed.

## Issues

1. After a non-possessory lien is avoided as a preference and preserved for the estate under 11 U.S.C. § 551, may a court also award the trustee monetary recovery under 11 U.S.C. § 550(a) for the “value” of the avoided transfer?
2. If § 550(a) value recovery is available, did the bankruptcy court err by valuing the avoided lien at the full amount of the underlying loan rather than an evidence-based measure of the lien’s economic worth?

## Decision

- The Ninth Circuit held that § 551 preservation does not categorically bar an additional monetary remedy under § 550(a); a bankruptcy court may, in its discretion, award value recovery if appropriate to benefit the estate.
- The Ninth Circuit reversed the $18,020-plus-interest money judgment because the bankruptcy court’s valuation methodology was unsupported and speculative.
- The case was remanded for further proceedings consistent with proper valuation and remedial limits.

## Legal Principles

- The grant or perfection of a security interest is a “transfer” that may be avoided as a preference under 11 U.S.C. § 547(b) when statutory elements are met and no exception applies.
- An avoided lien is automatically preserved for the benefit of the estate under 11 U.S.C. § 551.
- Section 550(a) permits recovery, for the benefit of the estate, of either the transferred property or, if the court orders, the value of that property; preservation under § 551 does not exhaust all remedial options as a matter of law.
- Awarding both § 551 preservation and § 550(a) value recovery is discretionary and must not overcompensate the estate.
- The “value” of an avoided, non-possessory security interest is not automatically the face amount of the debt; valuation must be supported by evidence tied to the lien’s economic worth (commonly informed by collateral value and the secured status of the claim), not hypothetical replacement-loan assumptions.

## Conclusion

The Ninth Circuit concluded that bankruptcy courts may, where justified, pair § 551 lien preservation with a § 550(a) value award after avoidance of a non-possessory lien, but it reversed a money judgment that equated lien value with the loan principal based on speculative reasoning and required a remedy grounded in defensible valuation.


In re Taylor (U.S.A.A. Fed. Sav. Bank v. Thacker), 599 F.3d 880 (9th Cir. 2010)