Opinion ID: $opinion_id
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Heading Rank: 1

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Text: On June 1, 1978, respondents loaned $119,000 to petitioner Aletha Dewsnup and her husband, T. LaMar Dewsnup, since deceased. The loan was accompanied by a Deed of Trust granting a lien on two parcels of Utah farmland owned by the Dewsnups.

Petitioner defaulted the following year. Under the terms of the Deed of Trust, respondents at that point could have proceeded against the real property collateral by accelerating the maturity of the loan, issuing a notice of default, and selling the land at a public foreclosure sale to satisfy the debt. See also Utah Code Ann. §§ 57-1_x0097_20 to 57-1_x0097_37 (1990 and Supp. 1991).

Respondents did issue a notice of default in 1981. Before the foreclosure sale took place, however, petitioner sought reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S. C. § 1101 et seq. That bankruptcy petition was dismissed, as was a subsequent Chapter 11 petition. In June 1984, petitioner filed a petition seeking liquidation under Chapter 7 of the Code, 11 U.S. C. § 701 et seq. Because of the pendency of these bankruptcy proceedings, respondents were not able to proceed to the foreclosure sale. See 11 U.S. C. § 362 (1988 ed. and Supp. II).

In 1987, petitioner filed the present adversary proceeding in the Bankruptcy Court for the District of Utah seeking, pursuant to § 506, to "avoid" a portion of respondents' lien. App. 3. Petitioner represented that the debt of approximately $120,000 then owed to respondents exceeded the fair market value of the land and that, therefore, the Bankruptcy Court should reduce the lien to that value. According to petitioner, this was compelled by the interrelationship of the security-reducing provision of § 506(a) and the lien-voiding provision of § 506(d). Under § 506(a) ("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"), respondents would have an "allowed secured claim" only to the extent of the judicially determined value of their collateral. And under § 506(d) ("To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void"), the court would be required to void the lien as to the remaining portion of respondents' claim, because the remaining portion was not an "allowed secured claim" within the meaning of § 506(a).

The Bankruptcy Court refused to grant this relief. In re Dewsnup, 87 B.R. 676 (1988). After a trial, it determined that the then value of the land subject to the Deed of Trust was $39,000. It indulged in the assumption that the property had been abandoned by the trustee pursuant to § 554, and reasoned that once property was abandoned it no longer fell within the reach of § 506(a), which applies only to "property in which the estate has an interest," and therefore was not covered by § 506(d).

The United States District Court, without a supporting opinion, summarily affirmed the Bankruptcy Court's judgment of dismissal with prejudice. App. to Pet. for Cert. 12a.

The Court of Appeals for the Tenth Circuit, in its turn, also affirmed. In re Dewsnup, 908 F.2d 588 (1990). Starting from the "fundamental premise" of § 506(a) that a claim is subject to reduction in security only when the estate has an interest in the property, the court reasoned that because the estate had no interest in abandoned property, § 506(a) did not apply (nor, by implication, did § 506(d)). Id., at 590-591. The court then noted that a contrary result would be inconsistent with § 722 under which a debtor has a limited right to redeem certain personal property. Id., at 592.

Because the result reached by the Court of Appeals was at odds with that reached by the Third Circuit in Gaglia v. First Federal Savings & Loan Assn., 889 F.2d 1304, 1306_x0097_ 1311 (1989), and was expressly recognized by the Tenth Circuit as being in conflict, see 908 F.2d, at 591, we granted certiorari. 498 U.S. 1081 (1991).