1. Seizure of Household Goods
Chapter 18
Seizure of Household Goods

2. Topics
The Four Situations in which Creditors Can Seize Your Household Goods
Nine Strategies to Stop Household Goods Seizures
Determining If a Threat to Seize Household Goods is False
Special Rights for Activity Duty Service Members and Their Families

3. Four situations where a creditor can try to seize your household goods
Purchase money security interests.
When you get credit specifically to purchase certain household goods and agree to have those goods serve as collateral for the debt, the creditor has a “purchase money security interest” in those household goods.
Non-purchase money security interests.
When a loan is not used to purchase household goods, but the creditor insists that you put up household goods as collateral for the loan, the creditor has a “non-purchase money security interest.”

4. Four situations where a creditor can try to seize your household goods
3. Execution on court judgment.
Although you have not put household goods up as collateral for a loan, creditors can still ask a sheriff or other official to seize these goods; but only after suing you and obtaining a court judgment on the debt.
4. Rent-to-own transactions.
When you rent goods with the option to purchase them after all payments are made, this is called a “rent-to-own” or RTO transaction. The merchant has the right to take back the goods if you get behind on the payment.

5. 9 Strategies to Protect Your Household Goods
Do not panic; determine if the threat is false.
Determine if the creditor can take the household goods as collateral.
Do not consent to the creditor coming into your home.
Do cooperate with the sheriff.
Challenge the creditor in court if you have defenses.
Claim that the household goods are exempt.
Negotiate an agreement.
Preventing RTO repossessions.
File for bankruptcy.

6. Determine if the threat is false.
The first thing to realize is that a creditor threatening seizure is usually bluffing.
The creditor is using the threat of repossession to frighten you into paying off that creditor’s debt first, even though it may be in your overall best interest to pay off other debts instead.
A threat to seize household goods is false if the debt does not fall within any of the four categories of allowable seizures.

7. Determine if the threat is false.
Even if one of these four situations applies, the threat is still usually false.
Beyond that, evaluating a threat will often depend on the value of the collateral, the difficulty of seizing it, and the nature and reputation of the creditor.

8. Determine if the creditor can take the household goods as collateral
Federal law prohibits creditors from taking “non- purchase money security interest” in most household goods.
A creditor can take household goods as collateral if you used its credit to purchase those particular goods, although it may choose not to do so.
Ask for identification and then comply with any order the sheriff makes. Find out from the sheriff which creditor has asked for the goods to be seized.
If you put your household goods up as collateral for a loan, usually it is not worth the creditor’s time and money to get a court order for the sheriff to seize the goods.

9. Determine if the creditor can take the household goods as collateral
Under federal law, a creditor cannot take the following household goods as collateral for a loan which is not used to purchase the goods: clothing, furniture, appliances, one radio, one television, linens, china, crockery, kitchenware, and other personal effects such as your wedding rings and photographs.
Since the goods the creditor is seeking are likely to have very little value if seized, the creditor may be willing to agree to a very fair voluntary repayment plan.

10. RTO repossession
Rent-to-Own (RTO) contracts give you ownership of rented goods after you make all the payments.
RTO companies may also threaten criminal action if you do not return rented goods, which is usually false.
Nevertheless, unless you have made substantial payments on a rent-to-own contract, it is usually a good idea to return the goods and stop paying.
Most states prohibit the RTO company from repossessing over your objection or entering your home without permission.

11. Special rights for active duty service members and their families
If you are in the military and on active duty, you have special protections against creditors who want to seize your household goods.
First, if you put up household goods (or any other personal property) as collateral for a debt before you entered active duty, the creditor cannot repossess the collateral without a court order.
Second, if you entered into a rent-to-own contract before you entered active duty, the rent-to-own company cannot take back the rented items without a court order.
Third, you have many protections if a creditor sues you in court.

12. Special Rights for Active Duty Service Members and Their Families
The most important thing is that you can ask that any court proceeding against you be postponed, simply by sending a letter to the court. The letter must:
Explain why your military duties interfere with your ability to defend the lawsuit.
State a date when you will be able to appear in court.
Include a statement from your commanding officer that your current military duty prevents you from appearing in court and that military leave is not authorized for you.