United States v. Security Pacific Finance Co.

These cases involve small loan company creditors who acquired non-possessory, non-purchase money security interests from debtors before the passage of the Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 92 Stat. 2549 (“the 1978 Act”). The debtors subsequently instituted bankruptcy proceedings and sought to claim exemptions for the assets involved and to avoid these security interests under 11 U.S.C. § 522(f)(2). The creditors responded that the application of section 522(f)(2) to their security interests would be unconstitutional in that it would constitute a taking of their property…