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The Bankruptcy StrategistLJN NewslettersNewsSections

Secured Lender's Loss of Possessory Lien Affirmed

By Lawrence S. Goldberg, David M. Hillman and Michael L. Cook
June 21, 2013

The U.S. Bankruptcy Appellate Panel (BAP) for the Eighth Circuit held on March 25, 2013, that a lender “lost its possessory lien when it turned the Debtor's account funds over to the Trustee without first seeking adequate protection.” In re WEB2B Payment Solutions, Inc., _____ B.R. 2013 ___, 2013WL 1188041, *5 (8th Cir. B.A.P. March 25, 2013) (emphasis added). Affirming the bankruptcy court's granting of summary judgment to the trustee, the BAP stressed that “a possessory lien is, by definition, released when possession of the collateral is relinquished.” Id. at *3.

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