Question about store-front payday loan collateral

[JLM0706]

Hello, I took out a stupid store-front loan that had me list items that could be used as collateral in case I default. Can I include that in the BK as a debt to discharge? This place is vicious in their collection attempts and have names of my relatives to call in case I cannot be reached. Argh. One attorney said that is considered a secured loan, the other said they cannot collect collateral since I did not use the money to buy any of the stuff listed. I want this place to leave me alone! What can I do?

[justbroke]

It is likely a secured loan, but it may "impair" your exemptions. I may be recalling incorrectly, but liens against "household goods and furniture" will almost always impair your bankruptcy exemptions. To be sure, a debtor should file a Motion to Avoid Lien in the bankruptcy to make sure the creditor's lien is removed. The second attorney was talking about what we call a non-PMSI, or non purchase money security interest loans. Those too are almost always avoidable (meaning the lien can be removed).

As for whether the discharge automatically removes such a lien is a question I can't answer. I tend to lien towards filing the motion for clarity.

[JLM0706]

Thanks justbroke . I guess I am not familiar with all the terminology; do you mean I should continue paying on it, or include it in the BK? I guess I should ask my attorney, he initially suggested I just pay it off, but it is causing issues for me at this point and I want to include it in bk and be done.

[justbroke]

I'm saying that your bankruptcy attorney should be able to have the lien removed since it likely impairs your exemptions.

So, what do I mean by "impair your exemptions?" I mean that you are entitled to keep certain property. This is done through something known as exemptions which protect certain property. Since this is not a "purchase money" loan (remember, it's called a "non" purchase money loan), you should be able to break their lien in the bankruptcy.

As to whether to keep paying now, I can't answer that question as I don't know when you're filing. Your attorney would be better at answering that. The real problem for the attorney, is that they would have to make a separate motion to have that lien removed. The attorney will usually charge extra for that (e.g. $250-$450 for the motion and hearing). I don't know why an attorney suggests just paying it off when a debtor is clearly not in the position to pay anything; but that's another story.

[JLM0706]

Thank you for clarifying. I think he said that because I was having a lot of anxiety about this place contacting friends and/or family since I had to list them. They "shouldn't" do so since I am taking their calls, however it is a predatory loan place and we know how vicious they can be. I will mention to my attornety that I cannot pay them without causing further hardship. Thanks again! Fingers crossed that the place doesn't bug family. So embarrassing.

[justbroke]

Yes. Those local loan companies are very predatory. They have you list all your belongings as collateral and then threaten to take it and/or sue you. They are local so that they can easily deal with filing lawsuits and obtaining writs of possession. Some of them are downright awful.

Now, that said, I did a loan with one of them but mine was entirely unsecured. It was temporary and I paid it off. I did not pledge anything for that loan. Those are far and few between, though.

If you have filed for bankruptcy and they bug your family, your attorney should pounce. By pounce, I mean to file a Motion for Sanctions against them and have them brought before the court to explain why they "attempted" to collect the debt by harassing you and your family.

[JLM0706]

Ah, so family is also protected. That is good to know! I was going to use my tax refund to pay them off but I need that money for the attorney now. I'm so eager to get this sucker filed and be on my way to (hopefully) peace.

[justbroke]

Hopefully your attorney has a plan in place to deal with them, but once you file they are enjoined (restricted) from any attempt to collect a debt, including harassment of you, your family, your friends, your neighbors, or even the stray dog that lives in the neighborhood, regarding this debt. The key will be on having their lien made unenforceable.

[bcohen]

Let's face it: creditors almost never want used household items back. The cost to collect and auction them off exceeds what they could possibly sell for. The only reason why retail store credit cards (and apparently some payday lenders) claim to have a "security interest" is to scare you into paying.

My advise is to STOP paying these people anything and IGNORE their phone calls. Unless you pledged the title to your motor vehicle(s) as collateral, they don't really have an enforceable "security interest" in anything. And of course, when you do declare bankruptcy, file a motion to avoid their alleged "lien" as it impairs your statutory exemptions.

[JLM0706]

Let's face it: creditors almost never want used household items back. The cost to collect and auction them off exceeds what they could possibly sell for. The only reason why retail store credit cards (and apparently some payday lenders) claim to have a "security interest" is to scare you into paying.

My advise is to STOP paying these people anything and IGNORE their phone calls. Unless you pledged the title to your motor vehicle(s) as collateral, they don't really have an enforceable "security interest" in anything. And of course, when you do declare bankruptcy, file a motion to avoid their alleged "lien" as it impairs your statutory exemptions.

I am so afraid they'll call relatives. Nobody knows about this stuff and I want to keep it that way! AND today- they drafted my checking account using the "card on file". CRAP. My attorney is going to kill me. I have not filed yet, but hope to soon.