Please Help! Security interest question

[Superox]

Howdy Folks.

My wife and I just filed chap 7 and there is a creditor claiming that they have a security interest in an HVAC system that was installed almost 2 years ago.

A little background:

We bought the system through the HVAC company and the financing they were offering at the time (The contract I have is from American General Financial). We bought the system for about $11k installed and the promo was no interest/ no payments for 18 months.

At the 18 month mark I began making the payments at roughly $400.00 per month and shortly after, we ran out of money. I may have made 4 or 5 payments to them total.

On the contract, the exact wording is as follows:

SECURITY: You give Creditor a security interest under the Uniform Commercial Code in any goods you buy under this account, until you pay for them. To determine Creditor's security interest, payments will be applied first to the unpaid amount of your oldest purchase, or, when made on the same day, to the lowest priced purchase. Creditor waives any security interest in your home if the goods are installed, and any laborer, supplier or similar lien.

We've been getting calls from a company called Springleaf regarding this debt and the collecters have been less than cordial. They are claiming that they have a security interest in the central air system and that they will come take it if we don't pay etc...etc...

Now, I never signed a contract with Springleaf.... I signed one with American General. After a little prodding this evening.... the collection agent from springleaf told me that they bought out american General in March of 2010. (not sure if this is even relevant but I'm trying to convey all the info that I can).

I'm hoping someone that is more experienced than me here can shed a little more light on this and what we can expect..... This reads to me that they gave up their security interest as soon as the system was installed....

Any and all input would be greatly appreciated! Thanks guys!!

Ox

[StartinOver]

They probably do have a security interest in the system, if they are a successor or assign of the original company, assuming that the original creditor would have claimed such an interest. However, to exercise it, they would have to send someone to rip it out of your house... they will end up with a used HVAC system that was likely custom fitted to your house. How likely are they to actually do this? Are they in the "selling used HVAC systems" business or in the "loaning money" business?

BTW, ask Springleaf caller what this means? "Creditor waives any security interest in your home if the goods are installed, and any laborer, supplier or similar lien." Sounds to me as if the original creditor realizes that ripping systems out of houses is not a sensible way to run their business, and is waiving that interest in cases exactly like yours?

[help1234]

We also has a HVAC system financed thru American General. Pretty much same scenerio and price as yours, except we had paid for about 12-13 months before BK. After filing they wanted a reaffirmation agreement which at our attorney's advice we declined to sign. They contacted our attorney several times and made threats... not sure exactly what they threatened because he did not tell us, but his assistant let it slip they were calling. We are now 8 months past discharge and have not heard a single word from them.

[Superox]

Thanks for the replies.... this is all so new to me and I'm still trying to make sense of it all.... Please feel free to chime in if anyone has any additional information.

[despritfreya]

The unit may have been installed almost 2 years ago but you have only made 6 payments against an $11k purchase price. The creditor IS secured by the unit. The issue is whether or not, if you do nothing, the creditor will try to take the unit back and whether or not it even has the right to do so since the unit may, under State law, be affixed to the home.

Hopefully you have an attorney who can point you in the right direction. If you do not want this matter hanging over your head for years to come, you need to make peace now. You do not have to pay the balance owed if you can come up with enough $$ to make a lump sum payment for the value of the property. This is called "redeeming for fair market value".

Des.

[Superox]

Thanks Des. Do you know where I would look to research the state laws pertaining to this? I've been googling this all night and so far the only answers I have found were right here in this post, lol (You guys are all great btw!!) I'm in NJ.

[despritfreya]

The problem you have is whether or not the HVAC is deemed a “fixture”. If it is, it is my understanding that, unless the finance company filed a “fixture lien”, it is now part of the home and the mortgage company’s lien takes precedent. In theory this would be based upon State law but I just don’t know. Before I posted above I tried to do a little research. The best I came up with was the below cite. But this case has nothing to do with your issue and cites to cases dating back as far as 1898:

In re Cooperstein, 7 B.R. 618 (Bankr. S.D.N.Y., 1980)

"The classic test of a fixture follows a three-pronged formula: "First, the articles must be actually annexed to the realty; second, they must be applied to the purpose for which that part of the realty to which they were annexed was appropriated; third, they must be annexed with the intention to make a permanent accession to the freehold . . . Although the cases are in conflict as to the degree of actual annexation required, in the instant case all the items were annexed to the realty, and in fact, they were firmly anchored so as to meet the more stringent tests. For instance, the dishwasher was securely connected to water pipes in the back, and not to the sink faucet, as is common. . . The air conditioning compressor was similarly connected to copper tubing and wiring, which was routed through a hole in the foundation, and eventually connected to the rest of the central air-conditioning system."

_________________________

I really have no additional info. In my practice my clients have either surrendered the item (because they walked from the home) or redeemed it since litigating the issue of the secured status was just not cost effective.

Des.

[tobee43]

superrox, i would speak with the atty handling your case.

we are from nj, our home is...or was in nj...(Chase still hasn't foreclosed on it), and nj is a KNOWN creditor "friendly" state. if you are filing state bk in nj, i would be extremely cautious and just make certain you have your ducks in a role.

as des points out, the system is or should be considered a permanent fixture in the house and again, pointed out that it goes with the house...if you are surrendering the house to the bank.

you can go online and check out the nj statues by going to the court site. i don't have it, but you can just google bk laws in nj and find out if a statue applies to: what most deem as a permanent fixture in the house...and what IF you didn't surrender the house or you did. i think that's really the question here.

by the way, we LEFT nj to file in another state. we had to...LOL!!! go underground for 2 years to do it, but it was far better for us.

best of luck to you,and let us know how you make out

[IamOld]

This is very interesting - I'm likely to be doing a Ch 13 AND I have $6k (maybe less) for an HVAC unit installed in 2007 (why? Because the one that came with the house literally burned out) - for over 2 years paid $200/mo - not even a dent in the principal. At any rate, it would REALLY help me if I could list it as a secured loan. Why? I have to pay Ch 13 anyway, so I really don't "care", and MORE IMPORTANTLY, since my unsecured is high (because of student loans) this would give even more breathing room to list as secured NOT unsecured. I don't think the creditor would object - GE private label financing through HVAC company - because they'd get more $$. The other one I'd like to ask for collective wisdom is that I have about $1,500 on Dell for Dell computers which I actually did/do need for work. Sadly they've been UP TO DATE until lately...at any rate, if I can, I would love to list them as secured for the same reason - financed thru Dell's Dell Financial Services. So I wouldn't mind listing this as secured - that'd take about $8K off of usecured for me. Again, with a Ch 13, i really don't care where the $$ goes - frankly, I would rather - in principal - have it go towards something I really have/need, etc...

Thoughts from the collective wisdom??

One more thing! What about HOME DEPOT store credit card? Is that possibly listable as secured????

[AngelinaCat]

We have had experience with American General, and w/o going into detail here, I can tell you that they were one of the meanest creditors that we ever dealt with, (AngelinaCatHub otherwise known as 'Hub, and I). If they were bought out by SpringLeaf, I am certain that many of the same employees and business practices are still in place.

Good luck to you.

[IamOld]

We have had experience with American General, and w/o going into detail here, I can tell you that they were one of the meanest creditors that we ever dealt with, (AngelinaCatHub otherwise known as 'Hub, and I). If they were bought out by SpringLeaf, I am certain that many of the same employees and business practices are still in place.

Good luck to you.

Angeline, THANKS!!!!!!!!

So then... I think in a Ch 13 when you're pay $X/month, and if I can list GE and Dell as secured creditors GE and Dell won't mind because they'll get paid!!! and I increase the room between Ch 13 cap and unsecured debt by about $8K!!! Does that make sense do you all think>?

[tripbuddy]

Wow, that original post could nearly be written by ME! Except our American General (bought out by Springleaf) was originally like $4300, and we stopped paying with less than $2000 left on it ($1300 or so, although now with late fees is probably more). Also, we aren't in NJ.

We ARE surrendering the house, it's been a money pit and almost the entire reason we're in our situation now. I don't know what they can do besides come and take the new (?? 2 years ago, lol) furnace. It'd be REALLY cold in the winter here, without it. There isn't anything else they can do, is there? I read on message boards how they are awful to deal with, but I'm not seeing why. Once they are made to contact the attorney, what more can they do to us? Take the furnace? If so, do they wait till the house forecloses, or what? The bank would probably have a HUGE issue with the pipes bursting in the winter because the furnace was removed, no?