BANKRUPTCY CORNER
Pawn Loans are Not Immune from Bankruptcy , However Florida Law Limits the Debtor ’ s Rights
JASON S . RIGOLI
In an unpublished opinion , the Eleventh Circuit held that a debtor in a chapter 13 bankruptcy could modify a pawn loan where the debtor had not defaulted , and the loan had not matured prepetition . In re
Womack , 2021 U . S . App . LEXIS 26127 , -- Fed . Appx . -- , 2021 WL 3856036 ( 11th Cir . Aug . 30 , 2021 ).
The facts of the case matter when determining whether the pawn loan can be modified . In Womack , the debtor had pawned her car and 11 days prior to the pawn loan maturing the debtor filed a chapter 13 bankruptcy . 2021 U . S . App . LEXIS at * 2-3 . Under the terms of the pawn contract and Alabama Pawnshop Act , the Debtor retained right , title , and interest in the vehicle with the pawnshop obtaining a lien in pawned vehicle . Id . The automatic stay , 11 U . S . C . § 362 ( a )( 3 ) - ( 5 ) froze the interest of the pawnbroker , as a lien holder , and the vehicle remained as property of the estate . Id . at * 10 . Accordingly , the debtor was able to modify the right of the pawnbroker under 11 U . S . C . § 1322 ( b )( 2 ) (“ Subject to subsections ( a ) and ( c ) of this section , the plan may — modify the rights of holders of secured claims …”) and paid the loan over the life of the plan .
In Womack the Eleventh Circuit distinguished the facts from a prior opinion In re
Northington , 876 F . 3d 1302 ( 11th Cir . 2017 ), in which the pawn contract had matured prepetition and the redemption period under applicable Georgia law had commenced and the Eleventh Circuit held that the debtor could not modify the pawn loan , because only the right of redemption came into the estate , which was extended to 60-days by operation of 11 U . S . C . § 108 ( b ), and upon expiration of the redemption period the vehicle dropped out of property of the estate by operation of law .
Northington , 876 F . 3d at 1306 , 1309-10 .
Interestingly , the Florida Pawnbroking Act specifically states that : “[ f ] or purposes of federal and state bankruptcy laws , a pledgor ’ s interest in his or her pledged goods during the pendency of a pawn is a right of redemption only .” Fla . Stat . § 539.001 ( 2 )( o ) ( emphasis added ). This means all property pawned under Florida law will be subject to the extension of the redemption period under 11 U . S . C . § 108 ( b ), but a chapter 13 debtor would not be able to modify the agreement pay the loan off over the life of a plan . See Northington , 86 F . 3d . 1302 .
C ’ MON THROW US A BONE !
WE LOVE FETCHING MONEY .
Rely on the professional team at CheckMark Collections for hassle-free collections .
We handle :
• Collections on judgements
• Cases too small for your firm
• Law firm collections issues
WHY WAIT TO GET PAID ?
Call us today
561.697.4911
CheckMarkCollections . com
PBCBA BAR BULLETIN 10