Foreclosure: Lost Notes

     Virginia Code §55-59.1(B) addresses the situation where the noteholder has lost the original note. With the frequency of sales of notes on the secondary market, the loss of the original note documents occurs more often than might be expected. The Code provides that if the note or other evidence of indebtedness secured by a deed of trust cannot be produced, and, the beneficiary submits to the trustee an affidavit to that effect, the trustee may proceed to foreclosure. However, the beneficiary must send written notice to the person required to pay the instrument stating that the instrument is unavailable and that a request for sale will be made of the trustee upon the expiration of fourteen days from the date of the mailing of the notice. The notice must be sent by certified mail, return receipt requested, to the last known address of the person required to pay the instrument, as reflected in the records of the beneficiary, and shall include the same and the mailing address of the trustee. The notice must also advise the borrower if the borrower believes that he may be subject to claim by a person other than the beneficiary to enforce the instrument, the debtor may petition the circuit court of the county or city whether the property lies for an order requiring the beneficiary to provide adequate protection against any such claim. Failure to give the notice does not affect the validity of the sale. 

Bankruptcy: Lien Avoidance: Household Goods

     Bankruptcy Code §522(f)(2)(A) provides debtors with the means to avoid a creditors lien on household goods. A good example is the case of McGreevy v. ITT Financial Services, decided by the United States District Court at Baltimore, Maryland. 

     In McGreevy the debtors lived in a town house and attempted to claim a shotgun and a rifle as household goods. The Court concluded that the firearms were not household goods because they were used primarily for recreation, not for the protection of the home. The Court ruled that there must be a functional nexus between the goods claimed and the household. The Court defined household goods as "those items of personal property that are typically found in or around the home, and used by the debtor or his dependents to support and facilitate day-to-day living within the home, including maintenance and upkeep of the home itself". Therefore, it may be reasonable to conclude that if firearms are maintained primarily for home protection, a connection would exist, and the goods would be covered under Bankruptcy Code §522(f)(2)(A).

     In the case of Fulton v. American General Finance, decided by the United States Bankruptcy Court at Harrisburg, Virginia, the Court was asked by the debtor to avoid the creditor/finance companies' liens with respect to a personal computer and a pistol and a rifle. The Court in Fulton had to first determine what was the definition of "household goods". The Court applied the definition rendered by the Fourth Circuit in McGreevy, which, as we discussed, requires a functional nexus between the goods and the household. In Fulton the Court found in regard to the personal computer, a nexus between 1) the keeping of the expenses of the family, 2) the writing of checks for the family, and 3) education for the debtor's child, and, life within the household. In regard to the pistol and the rifle, however, the Court did not find a nexus between the weapons and daily life within the household. The Court found that the weapons were not used to support and facilitate daily life within the household. The best that the debtor's testimony could have established was that the debtor had some desire to have these weapons on hand to protect his household and family from potential threats of bodily harm to person or injury to property. Accordingly, the Court in Fulton avoided the lien on the computer, but not the lien on the pistol and the rifle. I still think that it is reasonable to conclude that if firearms are maintained primarily for home protection, a connection would exist, and the goods would be covered under Bankruptcy Code §522(f)(2)(A).