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Got a letter demanding collateral after chp 7 discharge


Newlywed
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Hello all,

Hubby got a letter today from a law firm representing HSBC/Best Buy. It's not asking for money, but collateral, and claims to be a second request when we don't remember getting a first request. It says:

We have been informed that your case has been discharged. Please be advised that our client is secured by a purchase money security interest in consumer goods. If you intend to voluntarily surrender the collateral please provide the information requested below.

Name of contact person for making arrangements for return of collateral: __________.

Day time phone number for contact person: _______.

Please call us if you hve any questions blah blah blah.

Can they do this? It's not like we bought any large items even within a year prior to filing, as a matter of fact the TV we bought from them has to be at least 7-8yrs old and prior to filing we paid this card off once completely but charged much smaller stuff after that so technically that TV has been paid for already anyway.

I forwarded to our BK atty but she probably won't respond til Monday, assuming she's not already on vacation for the holiday. I doublechecked and this creditor was definitely included in our BK.

Thanks for any help.

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You can discharge any debt with a security agreement, you just have to return the items covered under the agree.

My first question is, have they informed you as to what is covered by the security agreement? Without that, you do not even know what to return to Best Buy. Honestly, even big screen TVs are not worth that much once they have been used. I do not know what they hope to recover but I would first send the attorney (or have your attorney draft a letter) a request for what is covered under the security agreement.

Also, realize that the law is all over the map on this issue. This is legal in Illinois but not legal in Vermont so I would suggest talking to your BK attorney first if you have one. I am surprised because most of the time, the creditor does not push the issue (Sears did not in my case nor my sister's case).

Finally, as for the TV, If you have a receipt showing when you purchased it and have a old statement showing you paid off the card after you purchased the TV, then send that to the attorney as proof that as far as the TV is concerned, it is paid for and hence not part of the security agreement for future purchases and you will fight it. That may get them to back off.

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Guest usctrojanalum

Can they do this?

Yes, of course. This is exactly what a security interest agreement is for.

It's not like we bought any large items even within a year prior to filing, as a matter of fact the TV we bought from them has to be at least 7-8yrs old and prior to filing we paid this card off once completely but charged much smaller stuff after that so technically that TV has been paid for already anyway.

This is the part that is confusing. They did not specifically ask which items they want returned? I highly doubt they want your 8 year old T.V., most TV's now are depreciated 50% in value 6 months after they are on the market.

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Best Buy is notorius for sending out these types of letters after the BK. They have what is known as a Purchase Money Security Interest (PMSI) in everything you purchased with the card.

Of course, as pointed out, if you purchased items then paid the card to zero then purchased more items, it would naturally mean they have an interest in the items that were unpaid at the time of filing and no further 'interest' in the items you previously paid off. The more difficult part would be to determine which items were unpaid at the time of filing if you never brought your card to zero and continuously carried a balance.

What I have seen on another board, bkforum.com, is that many of the filers just ignore the letter. Search the that board for actual experiences. It seems improbable that Best Buy would send someone out to pick up your items. Definately check with your attorney, but read others experiences too so you can formulate a plan.

If it were me, I would go through my statements and if there was anything that I still had in my possession that was charged just before filing, I would return that item OR tell them to come pick up the item. It is unlikely they are going to send someout out for $100 worth of goods (how much can old stuff be worth)! :mrgreen:

Edited by Denita
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You could ignore it but I would send a letter to the Best Buy attorney requesting that they tell you which items in particular they are asking for. In the case I saw where Sears won, Sears had to bring in all the receipts of all purchases and I am sure Best Buy would have to do that too so they should know which items are covered by the agreement.

Why I say to do the above is that if you end up in court, you can turn to the judge and say you were and are willing to return the merchandise, you just need to know what it is. I am betting though that if Best Buy had to present such as list, if it is small ticket stuff, they will turn around and walk away because the small ticket stuff is not worth anything.

I would ask check with the trustee to see if Best Buy filed a claim stating that their claim was secured and a list of the stuff that secured it. If they had not done so, they might have abandoned their rights to the collateral.

Again, if you have a BK attorney, take the letter to them and they should be able to clear it up for you.

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Again, if you have a BK attorney, take the letter to them and they should be able to clear it up for you.

Let your BK attorney handle it entirely. Do not send any letter to the Best Buy attorney as it may cause you to loose some of your protections. You lawyer was paid to handle these issues, let them do so.

If any person claiming to be representing Best Buy shows up at your home, tell them to leave. Unless they have a court order to collect specific items, you do not have to let them in your house or give them anything. As pointed out earlier, they have to file a claim with the court as to what merchandise is secured by the remaining balance. If they did not do so, then they probably have no claim. Your attorney will know how to handle it.

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My take:

The lien may be valid depending on specific state law requirements as to whether or not consumer goods require perfection to be enforceable, but they'd need a writ of replevin to take the goods. So they'd go to court, file a writ of replevin and have the sheriff come out and get it. That's expensive and since your goods are likely worth 10% what you paid for them, it ain't happening.

Hand over the letter to your bk attorney if you have one. If not, ignore or send a C&D to the sender.

Edited by jq26
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they'd need a writ of replevin to take the goods.

They would need to file their request to take the goods with the Federal BK court if they didn't get such already as part of the BK process (and it seems they missed that opportunity already). A local court officer has no authority to override the Federal injunction. If they do go to the county to try and get an order to take anything, then all you have to do is show up with a copy of the discharge and the local judge will deny their request.

Of course if they are foolish enough to try such actions, they are violating the injunction order and you could potentially open an adversarial complaint against them. Federal BK judges do NOT like it when creditors try to circumvent their Bench.

That's my take but like I said, your BK attorney is best suited to answer this situation. He/she will be most familiar with the judiciary members and their attitudes toward this sort of behavior.

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Oh brother! This is crazy! Thank you all for the advice & opinions.

I spoke with the BK attorney and she said to find out what the items are. When my hubby asked what they wanted, according to him they had a hard time finding/reading the list & admitted that most things were small ticket items which include:

movies/DVDs

music CDs

speaker wire

some kind of power box (we're not even sure what this is)

a Ipod shuffle

a $219 gift card used to pay for Geek Squad services - this is probably the most expensive item on the list.

Based on the list, I do think everything they're asking for were purchases made after the card was paid off a few years back.

Total amount they want for this stuff is $305.00, but we planned to start looking for stuff this weekend to give back to them if they wanna come get them.

We asked them to send a letter detailing the items they want back (why didn't they do this in the first place?), when they were purchased & for how much & we'll forward that to our attorney. Wish I had seen these posts before or I would've asked the atty to just handle it. Best Buy rep said they'd send the list but that they'd also contact Best Buy and they may just say forget it.

I know we don't have Best Buy statements from all these years & the online account has been cancelled. I'll have to go back to our bank statements which I'll have to pay for which sucks but guess it may have to be done.

Edited by Newlywed
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Best Buy is notorius for sending out these types of letters after the BK. They have what is known as a Purchase Money Security Interest (PMSI) in everything you purchased with the card.

Of course, as pointed out, if you purchased items then paid the card to zero then purchased more items, it would naturally mean they have an interest in the items that were unpaid at the time of filing and no further 'interest' in the items you previously paid off. The more difficult part would be to determine which items were unpaid at the time of filing if you never brought your card to zero and continuously carried a balance.

What I have seen on another board, bkforum.com, is that many of the filers just ignore the letter. Search the that board for actual experiences. It seems improbable that Best Buy would send someone out to pick up your items. Definately check with your attorney, but read others experiences too so you can formulate a plan.

If it were me, I would go through my statements and if there was anything that I still had in my possession that was charged just before filing, I would return that item OR tell them to come pick up the item. It is unlikely they are going to send someout out for $100 worth of goods (how much can old stuff be worth)! :mrgreen:

Thanks Denita, I'm nervous about ignoring it because they said they will put a lien on the items & after clearing our records via the 7 I'd hate to have a mark on our credit report over small items like this. I'll check out that forum, thanks again.

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they said they will put a lien on the items

If this wasn't a blunt violation of the injunction I would be laughing my @$$ off.

Exactly how do they plan to put a lien on speaker wire or even an iPod shuffle? Liens are reserved for big-ticket property that is, for the most part, registered with the government; like cars, boats, etc. They can't file a lien with the court over household goods that cannot be specifically identified. And, any such lien would have to be run through the BK court first for permission to do so.

Even a creditor with an existing lien on a car has to ask the BK court for the stay/injunction to be lifted before they can take the goods. I really think you are dealing with some 3rd party debt collector and not a true employee of Best Buy. This is too stupid to be a real employee of Best Buy's legal department.

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IMHO, I don't think it is a violation. It is like keeping a car without reaffirming. You ride through knowing that the lien is still valid in the goods and that it can be repossessed at any time. State law now controls the situation.

Since this isn't a vehicle in your driveway that can be repossessed under article 9, this would require entry into your home. That means they'd be required to obtain a writ of replevin from the sheriff's office. To my knowledge, it costs at least $150 in most jurisdictions to even obtain one. When you add in the costs to pick up and sell the goods, it would cost them far more.

So I'd tell them: You don't know what you still have, but if they want to retrieve it, then go through the sheriff's office and get an order for entry because you won't allow anyone in without one. As far as the demand for $350, if you have money to burn then give it to your favorite charity. And finally, send them a cease & desist letter. It'll cost you a stamp and you'll likely never hear from them again.

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...they said they will put a lien on the items & after clearing our records via the 7 I'd hate to have a mark on our credit report over small items like this. I'll check out that forum, thanks again.
There MAY ALREADY BE a lien on the items. Best Buy is good for this type of wording in their agreements. The lien is worthless really. There is no mechanism for recording liens for personal items. So if it isn't recorded anywhere and they can't get to the items, then what it is worth? Nothing really. And you have NO personal liability for the debt at this point anyway, so really this is nothing more than an attempt to extract an easy $350 from you.

What did your attorney say? I'm surprised the attorney didn't tell you to inform them they can pound sand.

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I would tell them that in order to get the stuff, they have to get a writ of replevin through the courts and bring the sheriff with the writ. If they go through all that (and pay all the fees), they can have it. I will bet any money that Best Buy will back off once they realize that it will cost them more to get, store, sell the items than they will make.

EX -

Gift Card - The only thing they can do here is try to enforce what is called a mechanic's lien on the item that was fixed and the take the item and sell that. Since the value of most computers drop like a rock, I would doubt they would get $219 for your computer after storage charges along with the costs to enforce the lien. That would be separate from the other stuff since this is not a lien on something that was purchased.

IPod Shuffle - Maybe worth $10 to $20 if you paid $50 for it.

Power box/Speaker wire - Maybe $1 at the most.

Music/DVDs/Movies - Again maybe $1 per item at the most.

These above values are garage sale values which is what they would get. So lets see, even if you exclude the mechanics lien issues, they would be out the $150 for the court fees plus sheriff fees with here are $80 to start plus an hourly fee (after all, the sheriff will have to wait while you gather all the stuff). We are at $230 before they have to pay storage and auction fees. That is why I bet that Best Buy will say forget it.

As for a mark on your credit report, they cannot put anything on because of the BK. That stops them from reporting anything other than discharged under CH7 and a $0 amount owed. Don't worry about that and don't think you have to send anything to "shut them up".

Finally, it would be your store cards that do this lien thing. I know Sears was good for this until they sold their credit unit to Citibank. In fact, Sears would actually show up at the 341 hearing to make the request for the items (which makes this more suspect because Best Buy should have done the same thing). The bank cards never do this.

I would talk to your lawyer but I bet Best Buy gives this up.

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If this wasn't a blunt violation of the injunction I would be laughing my @$$ off.

Exactly how do they plan to put a lien on speaker wire or even an iPod shuffle? Liens are reserved for big-ticket property that is, for the most part, registered with the government; like cars, boats, etc. They can't file a lien with the court over household goods that cannot be specifically identified. And, any such lien would have to be run through the BK court first for permission to do so.

Even a creditor with an existing lien on a car has to ask the BK court for the stay/injunction to be lifted before they can take the goods. I really think you are dealing with some 3rd party debt collector and not a true employee of Best Buy. This is too stupid to be a real employee of Best Buy's legal department.

Honestly I thought the same thing, because they don't have their stuff together. When my hubby called they couldn't even easily name what items represented collateral. And especially after he asked for a list, they said they'd send a letter to Best Buy & they'd probably just say forget about it.

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There MAY ALREADY BE a lien on the items. Best Buy is good for this type of wording in their agreements. The lien is worthless really. There is no mechanism for recording liens for personal items. So if it isn't recorded anywhere and they can't get to the items, then what it is worth? Nothing really. And you have NO personal liability for the debt at this point anyway, so really this is nothing more than an attempt to extract an easy $350 from you.

What did your attorney say? I'm surprised the attorney didn't tell you to inform them they can pound sand.

I told the atty what I said here and she told me to get the list to her as soon as we get it. She didn't say one way or the other if we should be worried or do anything else, and throughout the process she let us know if we needed or didn't need to do something. I assume she's waiting to see what they say & then pound them. I knew we didn't buy anything substantial in years from Best Buy so I wondered what this was about.

and it's not even $350, it's $305! Which we don't have to burn hubby isn't working! This is probably gonna sound like a dumb question, but I guess the collection agency would get a cut if they were able to get the $305 - or possibly get the whole thing since technically they shouldn't be asking me for anything anyway, huh?

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EX -

Gift Card - The only thing they can do here is try to enforce what is called a mechanic's lien on the item that was fixed and the take the item and sell that. Since the value of most computers drop like a rock, I would doubt they would get $219 for your computer after storage charges along with the costs to enforce the lien. That would be separate from the other stuff since this is not a lien on something that was purchased.

This made me LOL really hard because the computer we revived is now 12-13 years old, & we only did that cuz hubby doesn't wanna learn a new one. Altho we need it cuz he's looking for work my first instinct is to say take it & good luck! Doing so may also force hubby into the new millennium!

Thanks for the advice. Ironically I recently won a new Ipod shuffle that I was gonna donate to Toys for Tots & it's an older version than the one I have. Maybe I'd better hold onto it :)

Hubby had all the store cards & think only for Macys (two different ones) and JC Penney. Are they known for this too? Oh I had a Lane Bryant.

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I am going to bet the office program is Office 2007, $5 for it a a garage sale. Especially since MS will probably not release the license figuring you did not delete it from your computer anyways.

The next time the Best Buy lawyer calls, tell them to go pound sand and that if they want their stuff so bad, come get it. The court and sheriff fees themselves will be more than the items in question.

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I would tell them that if they cannot perfect the so-called lien by itemizing what they claim is under lien, then they are walking decidedly close to violating the bankruptcy injuction order by imposing personal liability where there is none.

And after doing some research I found almost every state exempts "household goods" from liens. Otherwise anyone with a judgement could come in and clean out your home of furniture and personal posessions deemed at yard-sale prices and set up thrift stores to dispose of that which they siezed. Since that isn't something I have seen anywhere, I am betting there is a reason...not legal to do so.

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Guest usctrojanalum

Doesn't sears do the same exact thing? A few months back I was hanging out in Federal Court in the SDNY and if I remember correctly I think an attorney representing Sears was at a BK hearing saying they wanted a washer, dryer, refrigerator and can opener (not joking) back.

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Doesn't sears do the same exact thing? A few months back I was hanging out in Federal Court in the SDNY and if I remember correctly I think an attorney representing Sears was at a BK hearing saying they wanted a washer, dryer, refrigerator and can opener (not joking) back.

Yes, Sears does this quite a bit too. However, there are 2 distinct differences between the OP and your sears request

1) Sears went through the regular BK process to request the items. In the OP's case, Best Buy did not. Sears also told the court what exactly the items in question were. Best Buy had to be prodded (and it almost looks like they did not even bother to try to find out until requested)

2) In the Sears case, a majority of the items were big ticket items that could be sold for enough to pay for costs and get some money back. In the OP's case, all the items would not even pay for storage costs by the time they are sold (the total sale cost was $305, $219 of that was services on a decade old computer).

As for the state issue on household goods, that is only after the fact on judgment. Otherwise, Rent-To-Own businesses would already be out of business. You can put a lien on household goods at the time of sale. However, the lien needs to be perfected through the courts before the items can be taken (and the creditor has to prove their was a lien put on the goods at the time of sale). There is an Illinois case (involved Sears) that discusses this issue as related in Illinois in great detail.

My thinking is that indeed Best Buy has a lien (actually 2 liens). However, if the OP simply forces the issue, for the amount we are talking, Best Buy will probably give up. If they do not, then give them back the stuff and laugh when they find out they spent $1000 - $2000 to get back $100 - $150. Court, Sheriff, and Lawyer time is not cheap.

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I am going to bet the office program is Office 2007, $5 for it a a garage sale. Especially since MS will probably not release the license figuring you did not delete it from your computer anyways.

The next time the Best Buy lawyer calls, tell them to go pound sand and that if they want their stuff so bad, come get it. The court and sheriff fees themselves will be more than the items in question.

We will definitely do that. And yes it is for MS Student Office 2007, which is even cheaper I believe. And that's a good point, my computer did not come from Best Buy so they can't take that & I'll still have the programs even if I just end up giving them the box and disc if I can even find them.

They did send a list of itemized items, but no prices or purchase dates as hubby requested. I told him to request prices and dates because we did pay off the bill in full at one point and I want to confirm what they're claiming was actually part of that balance if we have to return anything.

I forgot to bring the list with me today but will do so tomorrow to PDF to our atty just in case.

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