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Collateral Loan

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  • Collateral Loan

    We took out a "personal loan" in CA for approx. $12,000 over 1 year ago. The personal loan funds were utilized to purchase a friends used vehicle for our daughter, and about 8 months ago vehicle was sold. DMV title-transfer of ownership from "us to the new buyers and their lender completed months back."

    We're 100% current on the personal loan monthly payments. However in reading all the fine print and contacting the bank for the personal loan, the vehicle purchased was initially to be used as collateral. The bank calls it a "personal loan, secured by collateral." The original bank documents indicate that the title to the vehicle purchased was to have their bank name, address listed as the lienholder. However, this never happened by the bank, nor by us either. Title was only in our name, no lienholder. Bank says they failed to add themselves as lienholder, we should have done it.

    We have already filed for Ch. 7 bankruptcy, lender was already notified too. Lender's BK dept. indicates for us to keep making the payments to them, timely manner. We've never missed a payment, on the personal loan. In speaking with the banks BK Dept. we did not notify them the vehicle was sold months back, nor did they ever ask. Their BK dept. said online access was cut off, do to the BK filing. Yet, for us to send monthly payments to their BK dept., and the address was provided.

    The debt is being discharged through the BK 7. Yet, if we stop making the payments on this CA loan then what? Title was never in the banks name, we sold the vehicle, discharged through BK. At this point what options, rights does the bank posses? Or, in good faith should we just continue making the payments even though collateral sold, that the bank never had title to?
    Last edited by 1richard1; 04-08-2011, 01:13 PM.

  • #2
    You could have a problem with this one. You got rid of the collateral (the car) so if you stop paying the loan, the lender can't repossess. I would have a talk with your attorney about this. Did your attorney ask you what you did with the car or the money you received from selling it?
    Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
    I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.


    • #3
      The loan is 100% unsecured, "vehicle certificate of title never perfected."

      Debt included is listed under the unsecured bankruptcy schedules. Attorney advised the bank has no authority to repossess, cert. of title never under their name. He relayed the bank has the authority to challenge the debt, 341 hearing. However, that they'd loose since the lender extended a personal loan, secured by collateral without perfecting the title.
      Last edited by 1richard1; 04-20-2011, 11:06 PM.


      • #4
        These loans are specially secured by some assets you own or promise to hand the assets to the lender which the creditor can sell the collateral if the loan is unpaid.


        • #5
          Originally posted by 1richard1 View Post
          The loan is 100% unsecured, "vehicle certificate of title never perfected."

          Debt included is listed under the unsecured bankruptcy schedules. Attorney advised the bank has no authority to repossess, cert. of title never under their name. He relayed the bank has the authority to challenge the debt, 341 hearing. However, that they'd loose since the lender extended a personal loan, secured by collateral without perfecting the title.
          This is correct - if the title was secured correctly than this becomes an unsecured debt.
          I am NOT an attorney. Please take any advice given as advice from a consultant with experience in bankruptcy alternatives
          [link removed by admin]


          • #6
            This thread is more than 8 months old. Please do not resurrect old threads; it is against the forum rules.

            Thank you
            "To go bravely forward is to invite a miracle."

            "Worry is the darkroom where negatives are formed."


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