Snyder v. Household Finance Corp.

16 B.R. 380 (1982)

In the Matter of Johnny SNYDER and Wanda Snyder, Debtors,
v.
HOUSEHOLD FINANCE CORPORATION, Creditor.

Bankruptcy No. 1-81-02429.

United States Bankruptcy Court, S.D. Ohio, W.D.

January 7, 1982.

H. Clifford Bauer, Cincinnati, Ohio, for debtor.

Edward J. Utz, Cincinnati, Ohio, for creditor.

ORDER GRANTING DEBTOR'S APPLICATION TO AVOID THE LIEN OF CREDITOR

LEONARD C. GARTNER, Bankruptcy Judge.

On November 23, 1981 debtors filed their application to avoid the fixing of a lien on furniture. Creditor, Household Finance Corporation (HFC) entered an oral objection to debtors' application.

Debtor purchased in 1977 a television set financed by HFC. On September 5, 1978, after a default by the debtor, creditor refinanced the loan. The issue herein is whether the refinancing of the loan destroys the "purchase money" nature of the security interest held by HFC.

A purchase money security interest is defined as follows:

"O.R.C. § 1309.05. A security interest is a `purchase money security interest' to the extent that it is: (a) taken or retained by the seller of collateral to secure all of (or) part of its price, or (b) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used."

A purchase money security interest arises by virtue of a loan which enables a buyer to acquire property. However, refinancing changes the nature of the transaction and renders it not "purchase money" but merely a cash loan which leaves it vulnerable to avoidance under the Code.

Therefore, the lien of Household Finance Corporation on the television set is avoided.

SO ORDERED.