The Supreme Court heard arguments Monday in a case that could make it tougher for lenders to protect their interest in secured loans.

The case, Fidelity Financial Services v. Fink, involves a $14,000 car loan. The lender failed to record its claim on the car within 20 days as required by federal law. So when the borrower declared bankruptcy, the trustee lumped Fidelity Financial in with all unsecured creditors.

Fidelity Financial's lawyer, Michael P. Gaughan, told the justices that the 20-day federal limit was irrelevant because a separate Missouri law gives lenders 30 days to record loans. He noted that the lender recorded its claim by day 26.

But bankruptcy trustee Richard V. Fink said Congress intended to replace conflicting state laws with a uniform timetable for recording loans. "The meaning is clear," he said. "Twenty days is 20 days is 20 days."

A decision is expected early next year.

Mark I. Bane, a partner at the New York law firm of Kelley, Drye & Warren, said the decision will have broad ramifications.

Before this case, the Supreme Court has not decided whether the bankruptcy code or state laws take precedence. "This is a very significant issue," he said. "It deals with the historic conflict of state law versus federal law rights."

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