Pug Repossession

If you missed it, Thursday's New York Times had a story about a debt collector who seized the family's dog over unpaid bills. The pet, a purebred pug, was sold for the equivalent of $800 on eBay which apparently meant it could be seized under German law which allows valuable pets to be seized in repayment of debts. Mutts are exempt.

In the United States, there are businesses who will give purchase-money loans for pets, which are often structured as financing leases. The consequence of nonpayment is the usual for nonpayment -- repossession of the collateral even if it is the family's beloved Fido or Fluffy. There is legislation in Nevada, California and New York that tries to ban the practice, although the statutes are far from a model of clarity about what they make illegal.

We are in the process of revising the LoPucki, Warren & Lawless Secured Transactions text, and users can expect a new pet lending problem as part of Assignment 12 on the limits of what can serve as collateral. Purchase-money loans are clearly not covered by the Credit Practices Rule's policing of abusive security interests in household goods. To make it interesting, our new problem involves a non-purchase money security interest (PMSI) in a pet, but even then we don't think the Credit Practices Rule applies because a dog is not within the rule's definition of "household goods." But, we do think a debtor who filed bankruptcy could avoid a non-PMSI in a household pet under section 522(f) because that section specifically applies to "animals." Of course, to seek the protection of Bankr. Code § 522(f), the debtor has to file bankruptcy and either pay an attorney to bring the avoidance action or have the wherewithal to bring the action pro se. (It also occurs to me that less-experienced attorneys might not be aware of this option.)

For the book, we thought we had come up with a pedagogically useful but somewhat fanciful business that was taking non-PMSI's in the family pet until I was reviewing some bankruptcy files last night for research and just happened upon a case where the collateral for a secured loan was "Yorkshire Terrier." The debtor did not seek to avoid the lien but instead stated an intention to surrender the dog to the creditor.