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Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Hello, YANML. I just attended my creditors meeting. Chapter

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Hello,

YANML. I just attended my creditors meeting. Chapter 7. I have one secured creditor. One secured creditor objected. They have a UCC security agreemnt collateralized with a wooden dining room table. The table has been in my ex-wifes possesion for the past 4 years since our divorce. My wife lives an impoverished lifestyle.Truly. How do I defend against the secured parties claim and a possible immediate attempt at repossesion? Im aware of the intricacies of no break and enter etc. This is their kitchen table where they eat and daughter does homework. It is literally the only thing of monetary value in a 600 sq ft log cabin. The creditor was prompted by the bankruptcy trustee to go for reposession. Can I caliam this table as a wildcard exemption? (We are in Hawaii.)My wife and daughter live in abject poverty. At sale this table would generate(NNN) NNN-NNNNdollars in my realistc estimation. Please help.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.
HiCustomer

You cannot protect it by claiming it as exempt since it was put up as collateral for the loan. But, there may be some other things you can do.

Before I answer, I have to cover a few details regarding liens:

There are basically two types of liens a creditor can have on furniture: a purchase money security interest, which everyone calls a PMSI, and a non-purchase money security interest, which everyone calls a non-PMSI.

A PMSI is a lien where the creditor gave the borrower the money to buy the item which is the collateral (example: you walk in to a furniture store and tell them you want to buy a table, so they sell you the table on credit).

A non-PMSI is where the borrower already owned the collateral, then put it up as security for a loan (example: you need money, so you take your kitchen table down to the local bank and ask them if they will loan you money and use your kitchen table as collateral).

Bankruptcy law treats PMSI's and non-PMSI's differently.

If the loan was a non-PMSI, and the table has not yet been repossessed, then you can file a Motion to Avoid Household Lien in the bankruptcy case, and assuming the motion is granted, the creditor's lien will be removed and your ex-wife can keep the table. This is pursuant to 11 U.S.C. 522(f)(1)(B), HERE.

However, PMSI loans CANNOT be wiped out by motion. However, you do have the right to redeem PMSI-secured property pursuant to 11 U.S.C. 722, HERE. This means as long as the collateral is used for household purposes by the debtor (you) or a dependent of the debtor (your daughter who lives with your ex-wife), then you can file a Motion to Redeem with the court, which if granted, will prompt the court to order the secured creditor to accept a one-time lump sum payment equaling the full value of the collateral (not the amount owed), and then your ex-wife can keep the table for a one-time payment of $500 (assuming that is the value of the table). So, even if you owe $2,000 on the table, you can keep it if you can come up with $500 in the next 30 days or so assuming you file your motion before repossession and the court grants it. I know this is not ideal since you may not have $500 laying around, but it is all I know about. You can also expect the secured creditor to object to your motion and try to convince the court that the table is worth more like $1,200, so you are ordered to pay $1,200 to keep it rather than $500 (and I am just using your estimates here). So, it comes down to what you can convince the judge the table is worth as to what you have to pay to keep it.

Good luck,
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
Customer: replied 4 years ago.
Hi Joseph,

Just to clarify. I can file a Motion To Avoid Lien in a Chapter 7? To reiterate, I've filed Chapter 7 not Chapter 13.

Thank you,

Doug Warne
Expert:  JoeLawyer replied 4 years ago.
Yes, both of those motions work in Chapter 7.

You can only file a motion to avoid the lien if it was a non-PMSI loan though, it won't work if it is a PMSI loan.

If it is a PMSI loan, you have to reaffirm, redeem, or surrender the collateral in most cases.

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.


Edited by Joseph Ross on 11/6/2009 at 5:25 AM EST
Customer: replied 4 years ago.
Dear sir,

One last clarification and yes I of course will pay you and leave positive feedback. Thank you so much. You're gonna shake your head. Dining table in question is not listed on Schedule B, C but is indicated on Schedule D (as a description of property subject to lien with a valuation of 950.-) Can I, or do I need to ammend the petition to reflect this omission? Can I do this at the at the same time as I file the MTAL? (I'm assumining it needs to be on the petition before I file the Motion to Avoid Lien - Household Goods.) I believe the reason it wasn't on there is because in some ways believed it was no longer mine. (It's been at my ex-wifes for so long.) I realize this leaves me exposed because I re-signed the UCC Collateral Statement during several loan modifications subsequent to my divorce.

Doug
Expert:  JoeLawyer replied 4 years ago.
I can't really give you legal advice like that. I normally list all such items on Schedules B and C since 522 requires the item to be exempt as a prerequisite for succeeding on a motion under 522.

I suggest you consult with your attorney about what strategy will work best for you.

Thanks,
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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Customer: replied 4 years ago.
and yes to clarify this is indisputably, a non-PSMI item.

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