I no longer have the property. It was sold to pay bills many months before filing my bankruptcy. The jeweler/creditor is asking that I either 1) return the property (impossible since I don't have it), 2) pay a lump sum settlement, or 3) accept a new payment plan to pay off the debt.
The jeweler is threatening to sue for recovery of possession of the property if I do not agree to one of their options.
What are my rights and options?
The jeweler/creditor is pretty much out of luck at this point. They do have the right to recover the property (repossess) if they can, and you have an obligation to cooperate with their efforts to do so; but you are NOT obligated to deliver the property to them. Tell them you would be more than happy to surrender the property to them but you don't have it anymore. They will go away.
Unless you reaffirmed the debt formally with Ana agreement filed with the Court, the creditor cannot demand payment. The demand for payment violates the discharge injunction. The creditor can only request return of the goods if they had a perfected security interest before you filed. They rarely do. Call your bankruptcy attorney, or if you don't have one, call my office or a local bankruptcy attorney to discuss reopen ing your case and filing a motion for contempt, and possibly filing a fair debt collection practices action against them. This happened years ago with Sears, and they got into a ton of trouble over such actions; I've started noticing more and more jewelers showing up at meetings of creditors. Seems to be a new pattern of illegal conduct.
Tell the creditor you no longer have the items and if they contact you again you will be seeking sanctions against them for violation of the discarge order. You do not have to do anything because your discarge protects you. It is up to the secured creditor to find the collateral and repossess it. They can sue for recovery of possession but they cannot sue for money and you cant give what you dont have so let them sue. Make sure if they sue you answer the complaint and file a copy of the discharge order with your answer so you a money judgment is not issued against you. If you need help you can call my office at (310) 515-7799
As a general rule the lien of a properly perfected security interest survives the bankruptcy, and sometimes the secured creditor has included in the installment payment contract unwelcome consequences for selling, giving away, or "losing" the collateral. After bankrtupcy, a secured creditor must obtain a court order for possession of the collateral if it is not voluntarily surrendered. Many creditors threaten but are inwilling to invest resources in the state court legal process. Without knowing what the contract says, your rights and options are unclear.
Enough is at stake in potential criminal action that the cost of a consultation with local consumer/bankruptcy counsel is justified. With the documents and more facts, more precise advice will be possible.
Best wishes for a favorable outcome, and please remember to designate a best answer.
I believe the creditor has an automatically perfected purchase-money security interest in the consumer-goods collateral. Therefore they have the right under the UCC to recover the collateral or the proceeds of any sale of the collateral. If the sale proceeds are cash that is readily identifiable in the debtor's bank account, the security interest would attach to those proceeds. If those cash proceeds were used to pay debts to other third parties (i.e. the bills the debtor states were paid with the money) then the perfected security interest in those proceeds is cut off. What would remain, arguable,would be a right to sue the debtor for breach of the financing agreement contract. That is where an analysis of the specific contract terms would be key. More than likely the contract gives the creditor not only the right to go after the collateral, but also the right to recover the equivalent value in an action against the purchaser (debtor). The debtor states the collateral (the jewelry) was sold "many months before filing my bankruptcy". If it was sold within 90 days of filing, the creditor may have a claim for non-dischargeability based on a fraudulent transfer. In fact there could be a fraudulent transfer argument to be made even if the sale of the collateral was outside of the 90-day window. Regardless of what actions the creditor may or may not take, however, I agree with the other responses here regarding the creditor's current demands for payment appearing to be a violation of the automatic stay and should be addressed accordingly. I suspect that if and when the creditor obtains relief from stay to pursue this matter in State court, the debtor will have to deal with the issue then, if it isn't raised before then as I said in an adversary action in the bankruptcy. Based on all this, I also definitely agree with the recommendations for the debtor to retain an attorney as soon as possible for representation in the bankruptcy court or State court, depending on which way the creditor decides to proceed.
I cannot speak to the issues of CA law, but in Florida Mr. Oney would be correct -- selling property that is secured without permission of the creditor is a crime, and worth not discussing online.
That said, it is also a crime that is vary rarely prosecuted in FL as far as I am aware. Also the lawyers who discussed this issue as being "too bad" for the creditor are CA lawyers and will be infinitely more familiar with CA law on this point.
Best of luck to you!
If you no longer have the items, then the creditor may not require payment from you. Cooperate with them in attempting to locate the items, but you have no liability. The jeweler may not sue you; it is a violation of the discharge injunction. If they wanted to sue, the time to do so was during the pendency of your bankruptcy case. There are certain instances when they could move to reopen your case and litigate the issue, but it is highly unlikely they will do this or that they would be successful if they did. If you filed your bankruptcy with an attorney, I would suggest contacting that person to assist you in sending a cease and desist letter to the creditor.
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