Auto lenders included in BK can’t collect after discharge!!!!!!!

[twiz88]

I was financed through Santander Auto for my vehicle that I included into BK Chap.7. I was discharged on 10/9/13 and it feels great!! I called Santander after discharge to confirm that the loan was closed and shows discharged and they originally told me yes it was, Well last week I went to cancel my Gap insurance and Extended warranty for a total refund of $1937.00 at the dealer. The dealer (CarMax) called Santander to verify that the loan was closed and guess what Santander said NO there was still a balance!!...I told them the case was discharged and they can’t collect any payments on this account at all!!!! CarMax policy is they have to send the refund to the lender if the lender states it’s a balance. I made CarMax and Santander call me on a 3way because I don’t owe NOTHING!!!!... So once the refund is received by Santander from CarMax…..Santander then has to turn around and send me a refund check because I believe it’s against the law to still collect payments on the account included into Bankruptcy. Just want to get your thoughts on this situation Thanks!!

[despritfreya]

What makes you think the lien holder does not have a lien on the proceeds IT advanced to cover the insurance and the extended warranty? Unless you paid those premiums directly to the insurer (maybe you did), the money belongs to the entity that did pay it. I could be wrong about this so you should pull out your loan documents/contract and review them very carefully.

I assume you have surrendered the vehicle.

Des.

[LadyInTheRed]

Santandar still has a lien on your vehicle. They can't collect against you personaly, but they can collect on the security for the loan. Was the GAP insurance and Extended warranty paid for with the original loan? If so, I am guessing that any refund of those amounts is also security for the loan.

[twiz88]

What makes you think the lien holder does not have a lien on the proceeds IT advanced to cover the insurance and the extended warranty? Unless you paid those premiums directly to the insurer (maybe you did), the money belongs to the entity that did pay it. I could be wrong about this so you should pull out your loan documents/contract and review them very carefully.

I assume you have surrendered the vehicle.

Des.

When I talked to the lien holder yes they have a lien on the title (of course) but the vehicle has been sold at their auction once I surrendered the vehicle back in October. The rep at Sandtander stated the account is charged off in their system. Why would they still be applying funds to an account that has been charged off and vehicle sold??

[twiz88]

Santandar still has a lien on your vehicle. They can't collect against you personaly, but they can collect on the security for the loan. Was the GAP insurance and Extended warranty paid for with the original loan? If so, I am guessing that any refund of those amounts is also security for the loan.

I understand that but the vehicle has been sold at auction in October and the account shows charged off in there system. Why would they still collect funds on an account after the fact? Regardless of where the payment is coming from me or even CarMax they shouldn't be able to apply any payments at all especially after a case has been discharged.

[twiz88]

Just called the lender again. they said they have nowhere to apply the payment and it would be sent back to me.

[LadyInTheRed]

Just called the lender again. they said they have nowhere to apply the payment and it would be sent back to me.

Excellent!

Just FYI: a "charge off" means the creditor has written the debt off because they don't think they will be able to collect. Writing it off means they don't have to show the receiveable as an asset on their balance sheet. It does not mean they can't accept payment on the debt.

Regardless of where the payment is coming from me or even CarMax they shouldn't be able to apply any payments at all especially after a case has been discharged.

There is nothing that prevents a creditor from accepting payment on a discharged debt. They just can't demand payment. Collecting collateral is not the same as demanding payment from you personally.

[twiz88]

Excellent!

Just FYI: a "charge off" means the creditor has written the debt off because they don't think they will be able to collect. Writing it off means they don't have to show the receiveable as an asset on their balance sheet. It does not mean they can't accept payment on the debt.



There is nothing that prevents a creditor from accepting payment on a discharged debt. They just can't demand payment. Collecting collateral is not the same as demanding payment from you personally.

So basically they can put that amount towards the debt if they really wanted too?

[LadyInTheRed]

So basically they can put that amount towards the debt if they really wanted too?

Assuming the debt is secured by the amounts being refunded to you, yes. As Des' suggested, a careful reading of the loan documents is the only way to know that for sure.

[twiz88]

I will go a do some reading...Thanks