PLEASE HELP! Sold car secured by Credit Union

[KMC4]

Hello,

I've been searching many threads to see if I could find someone in a similar situation as me but I've only come relatively close to what I am looking for.

Basically, I've done a not so smart thing which I am concerned is going to cause nothing but problems.

Last June, my husband and I took out a secured loan from a local credit union. We used my husband's '93 Izuzu Trooper as collateral. The loan was for $3500. The current amount due is a little over $2700k. We haven't made a payment on the loan since March. Because the thruck became unoperable (so we thought) and we didn't think it would be worth putting money into getting it fixed, so we sold the truck back in November '07 to a person my husband found in the Pennysaver. We were give $400 cash for the truck and the person had a tow truck come and pick up the truck. We did not tell the person that the credit union was the legal owner of the truck. We both signed some sort of document but I honestly am not sure what it was.

We are in the process of filing for Chapter 7 and I don't know what to do about the truck. To make matters worse my husband actually spotted the truck (with a new license plate number). We both got excited but didn't know what we could actually do about it. My husband did take the license plate number down though The person must be driving the truck without the correct registration info b/c we're listed as the registered owners. The DMV is now threating us to pay the registration fees which I was going to do but in order to do so we have to have a smog certifcation done but of course we can't b/c there's no truck.

We've obviously made a bad sitation MUCH MUCH worse and I'm looking for any advice if possible.

PLEASE HELP.

[KMC4]

Bump

[JRScott]

Sounds like a sticky situation.

In your bk7 filing it might be wise to reaffirm the debt guaranteed by the truck you no longer have. While normally I'm against reaffirming debt in this case it could be in your best interest. Otherwise they might show up for the truck you don't have.

As for the guy driving it around you did sell it to him. He may have had a new engine or other repairs done by himself/friend etc to get it into working order. He would have done all this in good faith based on the sale. Which means to get it back you'd have reimburse him all of his expenses. He probably could sue you for that. He could also have applied for a junk title, which means there could be two titles to the vehicle now, though it is rare for that to happen it can happen.

[KMC4]

Thanks for the response, JR Scott. I had no idea there was such a thing as a junk title.

[JRScott]

You're welcome.

[HHM]

Yeah, JR is probably right, the buyer must have applied for a Salvage Title (or Junk Title) as that would be the only way he could have registered the car.

If the loan was truly secured, you would have had to give the credit union the title to the truck. The buyer assumes the risk of a car purchase if the title is not signed over to them at the time of sale.

But, in the big picture, this is probably not a big deal, the loan is small, the collateral, at the time of sale was worth nothing, this debt will simply get discharged in the BK and probably nothing will come of it. But, you may have to wrangle with the CU a few rounds before they give up. On a side note, you need to pull all your money out of that CU and open a regular bank account.

[AngelinaCatHub]

[KMC4]

Thanks, HHM.

Your response makes me feel a little better. I was under the impression that ALL secured debt would survive the bankruptcy.

My other issue is with the DMV. Since the credit union is the legal owner they'd have to sign the Notice of Release of Liability releasing my husband and I as the registered owners. We're going to be stuck paying registration fees for a car that we longer own/have in our possession. Any suggestions on what can be done?

[KMC4]

AngelinaCatHub,

Yes, we know what the VIN number is for the truck. According to DMV records though, we received as late notice for not paying the registration fees, it still traces back to us with the original license plate number. I'm thinking this person just got a new license plate someone and is just driving it.

I'm hoping that they're not going to consider $3500 enough to really make a big case out of it. Actually, the remaining balance is a little over $2700 now.

I don't know what the Kelly Blue Book would consider it's worth at this point.....it can't be too much though.

Unfortunatley, we don't have the bill of sale for this truck when we first purchased it in August 2002. We just simply sold the truck to this person back in November....we honestly were just trying to get rid of it.

[AngelinaCatHub]

KMC4, I understand that, but you should have written a recipt of some type to the guy who purchased it. If he is driving it with an invalid tag, he is in trouble. I would report the situation to the police, or better yet if you know the tag number, have it run as to who owns the tag and what vehicle is it assigned to.

I’m more concerned about what that car can do if it causes harm to another. You are still the owner and the Title is yours with a lien attached to it, so it is your car still. If you get a hold of this buyer, explain it to him that he has to register it properly. If it has to have an inspection decal, and the buyer hasn’t gotten one, sooner or later, he will be pulled and the car will look stolen in the cop’s eyes. Try to purchase the car back. The buyer knows he has no Title and this concerns me more than the money owed.

P.S. Attempt to purchase this car back. If he won't sell or wants a rediculious price, express to the buyer that you will be reporting this car for your own legal protection.

[KMC4]

I wish we would've written a receipt. My husband handled the bulk of the sale and he didn't give the person a receipt.

Is there any way the police can look up the new license plate on the truck? My husband wrote the number down when he spotted the truck last week at a shopping plaza. He tried to stick around to see if the person would come back to his car but my husband had to leave b/c he had to return to work.

We have no contact info for the guy we sold this truck to. It was a miracle that my husband even spotted it last week..we couldn't believe it.

This is such a mess.

[BnkrptcyLwyr]

First, what state do you live in?

Second, while you may have given the truck as collateral, did the bank actually go through the steps required to record their lien on the vehicle? Here in Michigan, if the financing institution does not apply to the Secretary of State and have their lien recorded on the title to the vehicle, then the lien is not "perfected" and in bankruptcy.

That would raise a couple of issues - is the buyer of your vehicle a good faith purchaser who would take the property free and clear of the lien on the bank.

Also, if the lien isn't properly perfected, the Trustee would be able to avoid the lien of the bank through his "strong arm" powers.

Yet again, if the transfer could somehow be avoided, then you may want to see if you can claim the property and exempt it in your bankruptcy. But here, it entirely depends on *how* the transfer is avoided as to whether you can exempt the property. My feeling is that if the lien is not recorded, and the purchaser had no clue about the bank's lien, then the transfer cannot be avoided, and the purchaser can keep the vehicle.

Having said all that, what is the effect for you?

The bank has a claim against you, the problem is whether the claim is secured or not. If the lien is not perfected, then when you go into bankruptcy the bank's claim is unsecured, and subject to discharge.

The only way to make the debt nondischargeable is if they can somehow claim that you committed fraud, made false representations, etc. If they screwed up and didn't record their lien, I would find it really hard to believe that they would file a nondischargeability proceeding in your bankruptcy case.

Also, do *not* sign a reaffirmation agreement. You don't have the vehicle, the debt is presumably dischargeable. It's tough luck for the bank.

To me, this is not a huge deal. If the Trustee wants the truck, and thinks he can get it, he'll go after the purchaser of the truck to get it back. Nobody should be coming after you after filing bankruptcy.

[KMC4]

BnkrptcyLwyr,

I live in California.

I know that the CA DMV has the credit union listed as the legal owner and my husband and I listed as the registered owners. I would think that qualifies as them having recorded their lien, no?

When we sold the truck to the guy in November, he was not aware that there was a lien against it. I believe he was one of those people who purchases cars and either junks them or fixes them up. This one was obviously fixed up b/c my husband seen it last week parked at a shopping plaza.

Thanks for your response. I was very worried that this could cause a huge problem during the bankruptcy proceedings.

[KMC4]

Does anyone out there have any advice regarding my dillema with the DMV? Even if the loan with the credit union is discharged in bankruptcy, will we forever be tied to the truck as the registered owners since the credit union is the legal owner of the truck? The truck is gone and I doubt we'll ever get it back. What happens now? The DMV wants their registration fee for the truck. I'll hate to have to keep paying registration fees every year for a vehicle we no longer own.

[KMC4]

Bump