You might be embarrassed to admit it, but you did it. You went to what I call “Flakey Finance Company.” You needed money. You were in a bind. And they were over there on the corner with a sign that said, “Need Cash Fast?” And you fell for it. You also gave them a lien—called a “security interest”—in your household goods.
You gave them what bankruptcy lawyers call a non-possessory, non-purchase money security interest in household goods. That’s a mouthful, but it means that your “stuff” has been pledged as collateral for that loan you needed so badly. Don’t feel bad. It can be fixed.
The Bankruptcy Code Allows You to Avoid this Lien as Well
These liens are avoidable as well, as long as you could otherwise exempt those household goods. This means your lawyer can file a motion to avoid the lien, serve Flakey Finance Company, and….voila, your household goods no longer have a lien against them.
There is a small catch. What you think of household goods might not be what the Bankruptcy Code thinks of household goods under this particular provision. Those three TVs, for example, well, you’re limited to only one. Same goes for your radio and VCR (yes, it says “VCR”—though most courts would say a DVD player is now the equivalent). But there are many household goods you can keep that are listed in this provision. And with only a few household goods left for Flakey Finance Company to take, they usually won’t bother enforcing their lien. They would need to sue you in a “claim and delivery” action. It’s unlikely they will do this when you’ve avoided liens on, say, 80% of your household goods.
The bottom line: your lien avoidance motion will just about gut any claim Flakey Finance Company has on your household goods. In effect, it transforms their claim from a secured claim to an unsecured claim.
Be sure to tell your lawyer if you visited Flakey Finance Company. She’ll be sympathetic and want to help you. And avoiding these types of liens is a good way to getting you the fresh start the Bankruptcy Code is all about.