Bankruptcy and loan.

April 15th, 2007 by Questions

I have a consolidation loan, in which personal items are used as security collateral. If I go backrupt, what will happen in that situation? Will I lose the items even though I don’t have some of the items anymore.
Thank you in advance for your time.

Questions

One Response to “Bankruptcy and loan.”



, A licensed trustee said:

In Ontario, we have a law calld the Executions Act (the other provinces all have something similar) that provides restrictions on the personal and household items that you can lose if you file bankruptcy.

Unfortunately, if you voluntarily pledge personal and household items as collateral for a loan then you waive those rights. For example, finance companies are famous (perhaps infamous would be a better word) for asking people to provide them with a list of all of their furniture when they take out a loan. The finance companies use this list to place a lien on the furniture in question. If the borrower defaults on the loan or files for bankruptcy the finance company has the right to take possession of the furniture.

This sounds very much like your situation.

The finance company is entitled to whatever you pledged as collteral or its fair market value. If you pledged a green sofa then the finance company has a right to come and pick up your green sofa. If you sold the sofa, the finance company is entitled to whatever amount you sold it for. wore out and you disposed of it then the finance company is entitled to nothing.

In most cases, if you offer some form of cash settlement the finance company will allow you to keep your furniture. Unfortunately, this is something you need to negotiate yourself – it is not something that trustees should be involved in.

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