BK7 Discharged but creditor still sending letters

[itsdavetime]

I have a BK7 which was recently discharged. One of the creditors is Wells Fargo, for a local furniture company (City Furniture). Wells Fargo is sending letters stating they want either the money owed or the furniture surrendered. They say that if I don't comply, they will file papers to remove the automatic stay. They were listed as one of the creditors in the case.

Is this possible? Are they allowed to do this if BK was discharged?

[ccsjoe]

Was this a regular credit card or a store card? I would send them a copy of your discharge and let them know they were included in the filing, thus are discharged. Further collection is a violation of the law and you will pursue action.

[itsdavetime]

This was a store credit card for the furniture store specifically.

[ccsjoe]

Being a store card they are probably claiming a PMSI (I will have same issue shortly with Citibank for Home Depot). My solution: Come and get it! You can exagerate the condition of the furniture a bit (dog/kid/cat/hamster peed on it, etc), and tell them to come get it if they want it bad enough. However, even if PMSI, I believe they are violating the discharge. Can someone correct me here?

[itsdavetime]

What is PMSI?

[justbroke]

If this is a store credit card you used to purchase furniture, then they have something known as a purchase money security interest (PMSI) on the property. This is no different than a lien on a car. However, their PMSI probably "impairs" your bankruptcy exemptions on your furniture. If your furniture was properly exempted in your bankruptcy, you could file a motion to avoid the lien because it impairs your exemptions (11 USC 522(f)).

However, it usually doesn't take that much work. Most of these PMSI creditors will go away if you tell them to just come and get the furniture. Unfortunately, they are entitled to do this. They do not have to file a Motion for Relief from Stay (RFS) because the discharge removes the stay. They are not in technical violation of the automatic stay.

If you filed through an attorney, you may be able to get the attorney to write a letter to WF to tell them that they are trying to collect on something that is otherwise both discharged and avoidable. The avoidable part just means that you could file the motion to avoid the lien and just be done with it. You should speak with your attorney about this.

If you didn't file through an attorney, you'll need to be more aggressive. I'd send a letter indicating that the case was discharged and that the lien is subject to avoidance since it impairs your exemptions. If you don't know what I'm talking about, then you are probably better off calling their bluff. Tell them the furniture is XX years old, the cats have ripped them apart, then used the furniture for their own personal litter box, and that your (insert animal, child, friend), vomited on it as well. Otherwise, you should be prepared to have them come get it and tell them it will be on the front lawn.

[ccsjoe]

Sorry dave. Purchase Money Security Interest. Mainly store cards have PMSI clauses giving them a security interest on the purchased goods until paid off, effectively becoming a lien of sorts. However, if they were listed and they are discharged.....I don't see how they can enforce it. If you were represented by an attorney you may want to shoot him a quick email about it. Otherwise, do a serach in this forum for "best buy" or home depot, etc. Lots of posts regarding PMSI experiences. Never heard of one 1. coming for the items, and 2. asking for items or money post-discharge. I still think it's a violation.

[itsdavetime]

I filed pro se. The BK was just discharged a few days ago.
So, I'm just going to ignore this letter and see if they try and pursue it, rather than responding to it. Sound like a plan?

[ccsjoe]

If the letter has a deadline, I'd respond with a copy of the discharge. If the letter mentions they will seek relief from the stay they probably have not yet been notified of the discharge. But that's just me. They may go away with that, and if they don't, then the cat peed all over it and the pigeons....well, you know, come and get it.

[justbroke]

I still think it's a violation.

It's neither a violation of the stay or discharge injunction for a secured creditor to demand payment or for it to exercise it's in rem rights. Now, if the creditor (WF) said that you had to pay and never mentioned the "or surrender the items"... it could be seen as a violation of the discharge injunction. Since this letter appears to be pre-discharge, they are just contacting the attorney of record (the pro se filer) to see what the disposition will be. No violation.

Remember, with few exceptions, all liens pass through bankruptcy untouched.

The only way a lien is modified in a bankruptcy, is if an action was taken to avoid the lien or otherwise nullify the lien. Without such action, the creditor remains secured. While the secured creditor can't pursue payment in a court on a discharged claim, they certainly can ask you to surrender the item or pay its value. If you wanted to pay its value (and this was the type of property that I would redeem), I'd say redemption is best... because you pay current market value (not balance of the claim). However, I don't recommend redemption in most situations unless it is other valuable property, like a car.

Stay violation. It's not, because the automatic stay ends for those things abandoned by the Trustee upon entry of the discharge order.

Discharge violation. It's not, because the secured creditor is entitled to ask for the items back or payment. If they asked solely for payment, then you would have a discharge violation.

justbroke's advice to pro se filers: you should always be prepared to actually surrender secured property upon discharge. The secured creditor has a right to recover the collateral (the secured property) should you choose not to pay them by redeeming the property.

[ccsjoe]

Remember, with few exceptions, all liens pass through bankruptcy untouched.

Thanks for the clarification jb. New one for me!

[tcreegan]

Hi itsdavetime,

Wells Fargo is sending letters stating they want either the money owed or the furniture surrendered.

Given justbrokes info, half of this looks like a stay violation, but since the discharge is days old, I'll bet the letter and discharge passed each other in the mail. Probably a case of my brother Eds law: Never attribute to malice things adequately explained by incompetetence.

So, I'm just going to ignore this letter and see if they try and pursue it, rather than responding to it. Sound like a plan?
Usually ignoring legal matters is not a good plan, but it might be a good one in this case. If they continue to pursue it and keep asking for $$, you could go back to the BK court with a string of stay violations. I've seen some folks collect a fair amount from stay violations, seems that judges don't like them. Of course, document everything.

Congrats on the pro-se filing and discharge !

Tom in Colo

[Fallonedward]

We purchased our central air a year ago from home depot, does this mean they can come and dismantle the a/c? ugh

It's neither a violation of the stay or discharge injunction for a secured creditor to demand payment or for it to exercise it's in rem rights. Now, if the creditor (WF) said that you had to pay and never mentioned the "or surrender the items"... it could be seen as a violation of the discharge injunction. Since this letter appears to be pre-discharge, they are just contacting the attorney of record (the pro se filer) to see what the disposition will be. No violation.

Remember, with few exceptions, all liens pass through bankruptcy untouched.

The only way a lien is modified in a bankruptcy, is if an action was taken to avoid the lien or otherwise nullify the lien. Without such action, the creditor remains secured. While the secured creditor can't pursue payment in a court on a discharged claim, they certainly can ask you to surrender the item or pay its value. If you wanted to pay its value (and this was the type of property that I would redeem), I'd say redemption is best... because you pay current market value (not balance of the claim). However, I don't recommend redemption in most situations unless it is other valuable property, like a car.

Stay violation. It's not, because the automatic stay ends for those things abandoned by the Trustee upon entry of the discharge order.

Discharge violation. It's not, because the secured creditor is entitled to ask for the items back or payment. If they asked solely for payment, then you would have a discharge violation.

justbroke's advice to pro se filers: you should always be prepared to actually surrender secured property upon discharge. The secured creditor has a right to recover the collateral (the secured property) should you choose not to pay them by redeeming the property.

[ccsjoe]

Fallonedward,

Your AC, as previously discussed (I remember this discussion in another thread, although maybe not you), is actually now a fixture, attached to the property and thus part of it. They can not simply come and remove it.

[IBroke]

About PMSI:

What if you purchased a kitchen with such a card or credit? Does it become part of the Homestead Exemption? Can they tear it out?