MEMORANDUM OF DECISION
ALFRED C. HAGAN, Chief Judge.
Arthur and Dian Eakin, formerly debtors in bankruptcy ("debtors"), have reopened their chapter 7 closed case and move for civil contempt sanctions against Beneficial Idaho, Inc. ("Beneficial"). The debtors had been discharged in the previous chapter 7 case and now seek to have Beneficial held in contempt for attempting to foreclose on their mobile home. Beneficial contends its attempt to enforce its lien was not in violation of the debtors' discharge.
Beneficial granted a loan to the debtors in 1991, and received in exchange a security interest in the debtors' mobile home. While a security agreement was signed between the parties, Beneficial's security interest was not recorded on the mobile home certificate of title. Debtors filed for protection under chapter 7 of the Bankruptcy Code in the spring of 1992. Beneficial was listed as an unsecured creditor in the debtors' schedules. Beneficial received notice of the filing, but did not file a proof of claim. Debtors received their discharge on August 11, 1992.
On December 4, 1992, Beneficial filed an action in state court to foreclose its security interest. The debtors then reopened their case and filed their motion.
The debtors contend the bankruptcy discharge relieved them not only of their personal liability for the debt, but that the unperfected security interest was also invalidated. Beneficial admits the debtors have no personal liability for the discharged debt; it asserts, however, that the lien was not invalidated by the discharge.
A lien that is not an allowed secured claim is void under section 506, unless the reason the lien is not an allowed secured claim is that no proof of claim was filed. 11 U.S.C. § 506(d)(2). In other words, if a lien is voided, it must be for some reason other than the fact no proof of claim was filed. Valid, perfected liens survive a discharge regardless of whether a proof of claim is filed. Koski v. Seattle First Nat'l Bank (In re Koski), 149 B.R. 170, 172 (Bankr.D.Idaho 1992) (citing cases); General Motors Acceptance Corp. v. Sawyer (In re Sawyer), 18 B.R. 661, 82 I.B.C.R. 44, 45 (Bankr.D.Idaho 1982) (citing cases).
Debtors argue the lien could not be an allowed secured claim regardless of whether a proof of claim was filed because the lien was unperfected.
Section 544 permits the trustee to avoid certain transactions, if those transactions could be avoided by a hypothetical lien creditor as of the date of bankruptcy.
"This Court finds that unavoided liens are enforceable after the automatic stay is terminated by discharge; thus, creditors with unavoided or unvoided liens retain their in rem rights." Polk County Fed. Sav. & Loan Ass'n v. Weathers (In re Weathers), 15 B.R. 945, 950 (Bankr.D.Kan. 1981). See also Estate of Lellock v. Prudential Ins. Co. of America, 811 F.2d 186, 189 (3d Cir.1987) ("[V]alid liens that have not been disallowed or avoided survive the bankruptcy discharge of the underlying debt"); Chandler Bank of Lyons v. Ray, 804 F.2d 577, 579 (10th Cir.1986) ("[F]or sections in the Code which relate to automatic stays and to lien avoidance to have any substance at all necessarily leads to the conclusion that unavoided liens pass through § 506(d) without action by the lienholder").
Thus, a valid security interest passes through a bankruptcy filing unaffected even if the lien could have been avoided so long as the lien was not in fact avoided.
Beneficial was acting within its rights when it sought to enforce its security interest in the mobile home. There are
A separate order will be entered.
11 U.S.C. § 506(d).
11 U.S.C. § 544(a)(1).