This could only happen in America -- and only in America's bungled legal system.
A consumer in Nashville took his motorhome to Music City RV June 17 so that it could be sold on consignment.
In August, while traveling in Colorado, the consumer learned that the dealership had closed its doors.
The day after they returned home, the couple went to the dealership, found it closed with no signs offering any assistance as to who they should call to get their RV. So, finding it on the parking lot, they drove it away thinking that it would never be sold.
Last week, they received a letter from the U.S. Bankruptcy Court for the Middle District of Tennessee and Robert Waldschmidt, trustee for Music City RV's creditors. According to the consumer, the dealership filed voluntary bankruptcy (Chapter 11) July 31 and that was converted to an involuntary bankruptcy (Chapter 7) Aug. 28 -- the week after they picked up their coach.
According to Waldschmidt, consignments with a value of at least $1,000 become property of the dealership unless the consumers had filed a UCC-1 form to secure a lien on the motorhome. The consumers said Waldschmidt had ordered armed guards to the dealership to prevent other consignees from collecting their RVs.
He then filed a motion, which the court granted, setting aside all claims and leins to the consigned RVs and seeking information about units that could possibly be sold at an auction to help pay for Music City RV's debts.
The owners of the consigned motorhomes just become other creditors of the dealership and must stand in line to get a portion of any money that can be recovered through the auction process. In fact, Waldschmidt he is collecting information about RVs that were taken from the lot between the time the Chapter 11 bankruptcy case was dropped and the Chapter 7 bankruptcy was initiated. Depending upon the circumstances, he said that it is possible that some of the units may be considered dealership property which could be sold.
If that is the case, a bankruptcy court can literally steal a motorhome. The consumer reports that the motorhome represents 10 percent of the family's net worth and the court wants to take it away from him even though he did nothing wrong. To protect his asset, the consumer must hire a lawyer at $350 per hour to represent him in court in hopes of convincing the judge that the motorhome belonged to the consumer, not the dealership.
I think it is safe to assume that most consumers who sell RVs on consignment simply see it as a way to put a "For Sale" sign on their unit in an area where RV shoppers are likely to gather. In exchange for the space, they are willing to pay a fee to the dealership for taking the time to sell the unit on their behalf.
Correct me if I am wrong, but I don't think any consumer ever considers a consigned RV to be the physical property of the dealership and one of its assets which the dealership -- or a bankruptcy attorney -- can dispose of on a whim to satisfy some other debt.
I wonder if a bankruptcy trustee would consider an RV brought in for service to be an asset of the dealership as well. Can you imagine the reaction a consumer would have upon learning that an RV brought in six weeks ago for repair -- and waiting for the correct part to finally arrive at the dealership -- could be sold to help the dealership pay its bills?
The bankruptcy court might have a legal right to consigned units, but it doesn't make it right to use America's court system to steal other people's property, especially when they are in possession of their licensed and titled property.