Secured or Unsecured

[Vervayne]

I have two credit cards I'm not sure about.

Lowe's Credit- I got this card about 3.5 years ago and bought a refrigerator, washer and dryer with it, along with various other items. I've been paying on it since. It works like a normal credit card at the store.

HSBC- I used credit to buy furniture at Furniture Row about 4 years ago. I've been paying on it since and have kept it current. The furniture isn't worth much at this point (it wasn't expensive to begin with), but I'm just not sure if I should list it as secured or unsecured.

Thanks for your help.

[tobee43]

normally credit cards are considered unsecured debt...unless you used the furniture to secure some other type of debt and someone has a lien on the goods. otherwise cc's they are usually considered unsecured debt.

[ccsjoe]

Vervayne, those cards should be listed as unsecured. Even though they have a purchase money security interest, they are not a "lien" type of situation such as a car loan.

[Vervayne]

That makes sense. Thanks!

[justbroke]

Actually, a PMSI is a type of lien that is similar to that of a car. A car loan is a PMSI-type of loan, but the difference is that the lien for a car must be recorded (usually on the title). Laws are also on the side of car lenders so that they can use "self-help" repossession.

Almost all other types of property (that are not automobiles, motorcycles, boats, etc), require that the holder of the lien start a lawsuit in order to recover the property. The older the property, the more likely the lender, in a bankruptcy post-discharge situation, won't want the property back.

So, generally speaking, these types of PMSI loans (purchase money security interest, for those who want to know) are usually a non-issue in bankruptcy. There are a few creditors who will send a letter and ask for a "settlement" amount, but it's usually not worth it. Just tell them to come and get the property. They usually won't, but you should still be prepared to let the property go. It's usually not worth it to keep it unless the settlement is a good amount. Did I not mention that you shouldn't settle?

As to listing them, I have no particular advice. I listed mine as secured on my petition since they are. Since this is the Pro Se forum, I'll go a step further to say that you'd generally list all PMSI property as secured, and then file a Motion to Avoid Lien for those things that impair an exemption in 11 USC 522 or your state's exemptions.

Maybe that was too much information!

[tobee43]

From Black's Law dictionary:

"A security interest that is created when a buyer uses the lenders money to make the purchase and immediately gives the lender security ([See the Uniform Commercial Code]); a security interest that is either (1) taken or retained by the seller of the collateral to secure all or part of its price or (2) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if that value is in fact so used. *** If a buyer's purchase of a boat, for example, is financed by a bank that loans the amount of the purchase price, the bank's security interest in the boat that secures the loan is a purchase-money security interest..."

justbroke....you really think that a lowes card and a furniture credit card would qualify under this category?? there are no ucc filings or liens against these credit cards? what am i missing?

[justbroke]

You need to read about PMSI liens and the contracts that grant a security interests in the purchases to the creditor. It is no different than any other secured transaction, yet it doesn't require the UCC filing. A PMSI is instantly "perfected" when you purchase the item.

They typically read this way

Notwithstanding anything to the contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money security interest in any items of Collateral ("PMSI Collateral"): (i) the PMSI Collateral shall secure only that portion of the Indebtedness which has been advanced by Secured Party to enable Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the "PMSI Indebtedness"), and (ii) no other Collateral shall secure the PMSI Indebtedness.

The problem is that almost all people never read their cardholder agreements and don't know that they granted a consensual "lien" against all property purchased with the card.

[ccsjoe]

I guess this is one of those where you can list the creditor in either section and not be incorrect. My attorney chose to list my Home Depot card under unsecured.

[tobee43]

Notwithstanding anything to the contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money security interest in any items of Collateral ("PMSI Collateral"): (i) the PMSI Collateral shall secure only that portion of the Indebtedness which has been advanced by Secured Party to enable Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the "PMSI Indebtedness"), and (ii) no other Collateral shall secure the PMSI Indebtednes

so the item is collateral that can be taken back therefore you list it as a "secured" debt...i.e. the sofa is secured by the actual sofa...so they can come and take it?? a nice used sofa!! just what they deserve!

Vervayne since justbroke filed pro se, i would follow that suggestion or lead on this one...and be very safe about it.

[tobee43]

joe...we did also, however, we didn't file pro se and these "new" credit card agreements are terrible!! i just wished they had asked for our first born...WAIT! on second thought....our second born would have been better...her college expenses were higher!

[ccsjoe]

joe...we did also, however, we didn't file pro se and these "new" credit card agreements are terrible!! i just wished they had asked for our first born...WAIT! on second thought....our second born would have been better...her college expenses were higher!

LOL...and yes, I agree that OP should follow jb's lead on this one just to be completely safe.