In re Short
United States Bankruptcy Court for the Southern District of Illinois
170 B.R. 128 (1994)
Robert and Dawn Short (plaintiffs) bought furniture on credit from Anderson Warehouse Furniture, granting a security interest that was assigned to American General Finance (American); after the Shorts fell behind, they consolidated the $2,880 furniture debt with another loan under a new note, with the disclosure statement describing American's "continued purchase money interest" in the furniture. After making only $394.38 in payments, the Shorts filed Chapter 7 bankruptcy and sought to avoid American's lien entirely and exempt the furniture, arguing the consolidation extinguished the original purchase-money security interest (PMSI).
Whether a purchase-money security interest in consumer goods automatically extinguishes when the original loan is later consolidated or refinanced with other debt.