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getting the most for ‘unsecured’ creditors

Glenn Stearns, Chapter 13 Trustee for the Chicago Suburbs (the “collar counties”) recently pointed out that creditors holding revolving charge accounts (department store credit cards are a classic example) frequently file claims as general unsecured creditors despite the fact that

  • cardholder agreements may give rise to a non-possessory purchase money security interest, and
  • section E3 of the chapter 13 plan now in use allows such claims to be characterized as secured

As a result the creditor may receive more in so-called adequate protection payments than they would in the form of a general distribution or dividend to unsecured creditors. Examples of creditors falling into this category include Best Buy, Circuit City, Home Depot, and Harlem Furniture.

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