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When Loan Companies Claim Security Interests in Your Personal Property

Creditors frequently use "non-purchase money security agreements" to put pressure on a borrower to pay a loan for fear of losing personal property.

When a person makes a loan, generally from a smaller loan company, it is an occasional practice for the loan company to list certain items of personal property , owned by the borrower as security for the loan. We are not talking about a loan secured by a car where there is a title but other personal property.

There are two types of these loans. The first is called a “purchase money security interest” loan. This is a loan where a loan company finances the purchase of some item of personal property. Perhaps an appliance or lawnmower. These type of loans are perhaps enforced more often with the lender wanting the property back, as the property may have some value. Jewelry stores often employ purchase money security interests when they sell jewelry.

The second type of loan is a “non purchase money security agreement.” This is where a finance or loan company lists property you already own as security for a loan. For example listing a lawn mower, computer, TV, that you have already own. The loan form that states these items are “secured” by the loan. The loan company might explain that they can repossess these items if the loan is not paid. The real reason they put this is put on the loan agreement is to intimidate the borrower. It allows them to put pressure on borrower to pay the loan for fear of losing this property.

As a practical matter, no matter what they may say, a loan company rarely takes the legal steps to take a persons personal property for a non-purchase money security agreement. They may threaten to do this with this kind of loan, but it is unlikely a lender would ever come to your home. Remember, you do not have to let a debt collector into your house to pick any item that is listed on the loan as secured.

The primary reason loan companies rarely take legal steps to possess a person's personal property is that the legal process to actually repossess personal property is complicated and expensive. Additionally, used personal property usually has minimal if any real value. Conseuently, while attachment of personal property is frequently threatened, it is almost never carried out. Furthermore, if an item was sold, thrown away or disposed of, it is not an issue.

Finally, seniors need to remember that their social security, pensions, retirement, disability and VA benefits are protected by federal law. If a creditor received a judgment this money cannot be taken or garnished. Also remember, when you are represented by HELPS these collectors have to communicate with us not you.

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Peace of Mind
These HELPS clients were dealing with harassing debt collectors and anxiety over old Debt. HELPS provided a solution to their financial worries.