Auto Title Loan, if I file Bankruptcy And never give the the car what will happen?

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1. S said:

   The loan was secured via the title. If you don’t pay back the loan, the loan company can seize your car and sell it. They can then pay back the loan with the proceeds. Any remainder, after loan and fees, could come back to you.

   Theoretically you could perpetually hide the car, however this is a poor moral, legal and practical decision that could result in additional fees for you, among other problems.

   Finally, when you go to court for bankruptcy, you have to do so with "clean hands". Because the outstanding loan, secured by the title is a valid loan, hiding the car as you initiate bankruptcy proceedings would violate this "clean hands" doctrine, and throw the entire bankruptcy into doubt.

   This is not an ideal situation for you, as you probably need your vehicle. However, to reduce any long term problems that could multiply, your best bet is to pay the loan off, even if that mean selling the vehicle.

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   January 19th, 2010 at 7:28 am
2. the tax lady said:

   The only way to keep the car in a bankruptcy is to reaffirm the debt.

   So, no, you don’t get to keep the car.
   And you don’t get to keep it and pay less for it.

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   January 19th, 2010 at 7:28 am
3. Don said:

   I am afraid the bankruptcy will not help you with this. Those title loans are one of the worst products in the lending market. They are right up there with pay-day loans. They will probably report the car as stolen at some point and you may get pulled over about it. So sorry you got into this mess. You might call the title loan folks and explain the situation to see if you can work something out. They really don’t want the car as they can only get the wholesale value. Good Luck.

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   January 19th, 2010 at 7:28 am
4. rpg said:

   If the title loan company properly perfected a lien on the vehicle, you will have to repay the loan in order to keep the vehicle – with or without bankruptcy.

   It is worth an in-person visit with an experienced local bankruptcy attorney though. Sometimes those title loan companies do not bother to correctly record a lien on the vehicle, in which case the lien can be avoided and the debt discharged.

   If you file bankruptcy AND the lender has a valid lien on the vehicle AND you do not reaffirm the debt and repay the loan, the vehicle can be repo’d by the title loan company at any time, so long as their judgment for replevin is good (usually 10 years, renewable for another 10). This will make it awfully difficult for you to actually "use" the vehicle (or continue to pay the registration fee) because if you drive it, it will be visible and if you pay the annual licensing and registration fees, they will also be able to find it. What good does a vehicle do you if it is just hidden unlicensed and unregistered in a barn or something, while you become a fugitive from the law? That is not a good solution.

   Repo companies can and do find vehicles that people are attempting to hide if the vehicle is driven. What is likely to happen is that you will drive it to work or to the grocery store or the dr’s office or something some day, and will come out and find it gone. That is not a pleasant experience to have to worry about every time you drive it either.

   The "cram down" option in Ch 13 is only available on vehicle loans obtained more than 910 days ago (about 2.5 years). If you do have a vehicle loan which you took out more than 910 days ago, and the vehicle is worth less than the amount you still owe, the amount you have to repay can be "crammed down" to only the amount that it is worth now. But since you just took out this title loan several months ago, it would be several years before that option is available to you in bankruptcy.

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   January 19th, 2010 at 7:28 am

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