In a case that will likely be much more relevant to Chapter 13 cases, rather than Chapter 7 cases (where creditors are far less interested in repossessing household goods), Judge Bonapfel has ruled that a store credit card issuer’s claim must be treated as secured in the Debtor’s Chapter 13 plan.
In In re Wages, 2009 Bankr. LEXIS 4325 (Bankr. N.D. Ga. Dec. 21, 2009), the Debtor had applied for a credit card at Best Buy. The Application, signed by the Debtor, stated the following:
"You grant us a purchase money security interest in the goods purchased on your Account." 4 Section 3 of the Application also states that use of the credit card constitutes agreement to the terms and conditions of a "Cardholder Agreement and Disclosure Statement" (the "Cardholder Agreement") that would be sent with the credit card. Paragraph 5 of the "Important Terms" set forth in the Cardholder Agreement states in pertinent part, "[Y]ou grant us a purchase money security interest in the goods purchased with your Card."
Debtor made several purchases on the account, each time signing a sales slip. The Debtors’ Chapter 13 plan proposed to pay HSBC Bank Nevada, N.A. as an unsecured claim.
The Debtors contend that HSBC does not have an enforceable security interest under O.C.G.A. § 11-9-203. Under § 11-9-203(b)(3)(A), the creation of a valid security interest requires, among other things, the debtor’s authentication of "a security agreement that provides a description of the collateral." A description of personal property "is sufficient, whether or not it is specific, if it reasonably identifies what is described," O.C.G.A. § 11-9-108(a), but a description only by type of collateral is an insufficient description of consumer goods in a consumer transaction. O.C.G.A. § 11-9-108(e)(2). The basic requirement is that the description must make possible the identification of the collateral described.
The Court, however, disagreed that the creditor had not met these requirements.
Georgia law does not require that a single document contain all of the requisites of a security agreement… Here, both the Application and the Cardholder Agreement that it incorporates, coupled with Mr. Wages’ use of the credit account, establish the existence of a security agreement in which he agreed that HSBC would retain a security interest in goods he might later purchase on that account. When he purchased the goods and thereby acquired rights in them, HSBC retained a security interest in them pursuant to the earlier security agreement. O.C.G.A. § 11-9-203(b)(2). The sales slips that evidenced transactions on the account show the purchased items that serve as collateral, and Mr. Wages has not challenged the adequacy of those descriptions.
The Court therefore concludes that HSBC has a valid and enforceable security interest in the goods Mr. Wages purchased on the account… The Chapter 13 plan proposed by the Debtors in this case contemplates treatment of HSBC’s claim as unsecured. As such, it cannot be confirmed. The Debtors shall have 20 days from the date of entry of this Order to file and serve a modification to their plan, or to propose a new plan, that deals with the claim of HSBC as a secured claim.
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