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  1. #1
    Join Date
    Mar 2018
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    6

    Default Is a Secured Lender Entitled to the Return of Property In-Kind

    My question involves bankruptcy in the state of: LA

    Lender L loans Borrower B the purchase price of widgets.
    B signs an authentic security agreement granting L a security interest in those widgets at the time of purchase.
    B is in possession of the widgets.
    B files Chapter 7 bankruptcy.
    Trustee T is assigned to administer B's bankruptcy estate.
    T is in possession of the widgets.

    Is L entitled to the return of the widgets in-kind? Or is T entitled to liquidate the widgets and return only the widgets' value?

  2. #2
    Join Date
    Sep 2005
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    Default Re: Is a Secured Lender Entitled to the Return of Property In-Kind

    If the seller has a valid, perfected security interest, and the buyer has defaulted, then the seller should have the option of repossession. That's true even if the value of the product at issue has increased since the time of the original sale.

    The rest depends on the details. Talk to your bankruptcy lawyer.

  3. #3
    Join Date
    Mar 2018
    Posts
    6

    Default Re: Is a Secured Lender Entitled to the Return of Property In-Kind

    So, if L has a PMSI in the widgets and T is in possession of the widgets because B filed Chap. 7, L can demand the widgets back from the Debtor B only if Debtor/B is in default? Ie, the bankrupt borrower B can keep the widgets if he is not in default on the Note?

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