What can you do about a UCC Lien?

Question

My husband filed Chapter 7 BK that was discharged in April of '08, and we just received a letter from one of the creditors seeking to obtain their "secured property" through their filed UCC Lien. The letter asks him to respond within ten days. Do we have to? What will they do?

Answer 1

A UCC (Uniform Commercial Code) lien is utilized in the procurement of secured property.  These liens withstand a bankruptcy challenge and the creditor reserves the right to take the property back.  You should coordinate any response through your bankruptcy agreement.   Usually, they will want one of two options.. 1) Give them back the asset in question, but your attorney must draft a response stating that any values owed would be bound and covered by the bankruptcy (provided this property was listed in the documents filed with the court) OR 2) the creditor would like you to sign what is called a "reaffirmation agreement." This agreement means that you will keep the property and continue paying your normal monthly payments on it.  This is quite common in people who have secured property and want to keep it and pay on it.  

However, before you move further, take the letter to the bankruptcy attorney for him/her to issue an official response on your behalf.  If any other questions, please feel free to e-mail.  

Answer 2

They are claiming whatever property you used a collateral for a secured loan you took out.

I would talk with the lawyer that did the bankruptcy.

I believe when you claim bankruptcy property put up as collateral can still be repossesed by the creditor even if the loan is discharged.

Here is what it says on wikipedia regarding chapter 7:

In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt; however, the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior (e.g. concealing records relating to financial condition) and certain debts (e.g. spousal and child support, student loans, some taxes) will not be discharged even though the debtor is generally discharged from his or her debt. Many individuals in financial distress own only exempt property (e.g. clothes, household goods, an older car) and will not have to surrender any property to the trustee. The amount of property that a debtor may exempt varies from state to state. Chapter 7 relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is discharged. For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged.