Legal Question in Bankruptcy in North Carolina

Law answers That would be considered a secured debt. However, they may never have filed a UCC1 financing statement.

Your question answers itself. If the creditor holds collateral to secure the repayment of a loan, it is a secured debt. This often occurs when the selling store finances the sale. All it takes is the statement "I grant a security interest in the purchased goods...." or language to the same effect to create the security agreement and the lien. It is not necessary for a vendor who holds a security interest like this one to record a financing statement to perfect the lien. The bankruptcy code requires that a debtor (filer) either reaffirm, redeem or surrender the collateral and must state so in the filing papers. Because the collateral is seldom worth picking up, many filers agree to surrender, knowing that the creditor will not repossess. If the collateral is wanted and valuable, some filers will file a motion to redeem for the fair market value, which is usually much less than the debt. Seldom will a creditor contest the motion and all that would remain is to send the check. Finally, just like the situation with an automobile, the filer could negotiate a reaffirmation of the debt for the fair value and with agreed terms and payments over time.