[B12]

My question involves an auto loan or repossession in the State of: Washington

This question is for my friend Billy.

Billy's bank, Navy Federal Credit Union (NFCU), gives its members pre-authorized checks up to a set amount to buy cars; i.e. all one has to do is write the payee's name on the check, the amount they are buying the car for, and sign it.

Billy has had many car loans with this bank, but one day Billy got the bright idea that he would use it to pay off his unsecured debt too. So, Billy got a $50k loan (blank check) from the NFCU, and he wrote the check to himself for $50k, bought a $15k car, and used the rest of the money to pay off some of his unsecured debt. Billy then sent NFCU the title to the car, and everything was fine for about six months.

Then he decided that he was going to pay off the rest of his unsecured debt, so he found a car on eBay, applied for a $69k auto loan, and gave NFCU the VIN number off of the auction as if that was the car he planed on purchasing. Billy got approved, used the extra $20 to pay of the rest of his unsecured debt, and NFCU sent the title for the original car back to Billy.

Now, NFCU is asking for the title to the new car, but Billy of course doesn't have the title or the car, he only has the original car that he told NFCU he was trading in for the new car. Now NFCU is threatening to change the auto loan into a consumer loan (unsecured loan), and raise the interest from 5.9% to 10.9%, but Billy doesn't think they will do that since it is a $70 loan after all.

What has Billy gotten himself into? Can he actually get into trouble for fraud or something like that for not having the actual car he got the loan for?

Billy plans on telling them that he went to buy the car, but by the time the money arrived the auction had already closed on eBay, and that he decided to just go ahead and apply the money to his debt.

Any suggestions on this one? What if Billy decided to file bankruptcy? Bankruptcy would leave NFCU with nothing to show for the $69 auto loan they gave him.

Thanks in advance,

Billy may have either shot himself in the foot on this one, or he may have found a really nice loophole

[jk]

Billy may have either shot himself in the foot on this one, or he may have found a really nice loophole

Ya, he can tell all his buddies in jail about it if he did what it sounds like he did.

While it may not have gone so far as being criminal, it may have. He obviously defrauded the bank and he is getting off easy with them converting the loan to a personal loan from an auto loan. They could possibly simply call the loan due and payable now since he did not use the money as he presumably contracted to.

Worse case scenario; criminal charges and a civil suit to recover the funds.

oh, btw; filing BK does not keep you out of jail. As a matter of fact, it lends credence to the possible illegality of the situation.

[cyjeff]

My question involves an auto loan or repossession in the State of: Washington

This question is for my friend Billy.

Billy's bank, Navy Federal Credit Union (NFCU), gives its members pre-authorized checks up to a set amount to buy cars; i.e. all one has to do is write the payee's name on the check, the amount they are buying the car for, and sign it.

Billy has had many car loans with this bank, but one day Billy got the bright idea that he would use it to pay off his unsecured debt too. So, Billy got a $50k loan (blank check) from the NFCU, and he wrote the check to himself for $50k, bought a $15k car, and used the rest of the money to pay off some of his unsecured debt. Billy then sent NFCU the title to the car, and everything was fine for about six months.

Then he decided that he was going to pay off the rest of his unsecured debt, so he found a car on eBay, applied for a $69k auto loan, and gave NFCU the VIN number off of the auction as if that was the car he planed on purchasing. Billy got approved, used the extra $20 to pay of the rest of his unsecured debt, and NFCU sent the title for the original car back to Billy.

Now, NFCU is asking for the title to the new car, but Billy of course doesn't have the title or the car, he only has the original car that he told NFCU he was trading in for the new car. Now NFCU is threatening to change the auto loan into a consumer loan (unsecured loan), and raise the interest from 5.9% to 10.9%, but Billy doesn't think they will do that since it is a $70 loan after all.

What has Billy gotten himself into? Can he actually get into trouble for fraud or something like that for not having the actual car he got the loan for?

Billy plans on telling them that he went to buy the car, but by the time the money arrived the auction had already closed on eBay, and that he decided to just go ahead and apply the money to his debt.

Any suggestions on this one? What if Billy decided to file bankruptcy? Bankruptcy would leave NFCU with nothing to show for the $69 auto loan they gave him.

Thanks in advance,

Billy may have either shot himself in the foot on this one, or he may have found a really nice loophole

You mean, can Billy be arrested for pretending to buy a car so that he could talk a lending institution into giving him a huge loan and the title to his car?

Yes, yes he can. He committed, depending on the method of transmission, fraud in one of several flavors.

Billy should have a sit down with the Lender. He should be thanking his lucky stars that they are just changing the loan to unsecured and double the interest rate.

It could have been far worse.

If Billy files bankruptcy, a couple of things could happen.

One, the lender could take Billy to court for the amount... and win. Such a judgement would survive a bankruptcy... not to mention that now Billy gets to pay their legal fees.

Two, the lender has enough of Billy's shenanigans and files charges with the District Attorney.

[jk]

One, the lender could take Billy to court for the amount... and win. Such a judgement would survive a bankruptcy... .

would you mind explaining how this is true. I can see if they first proved he illegally gained the money and as such, not be dischargable via BK but merely to sue for the debt and be awarded a judgment, I can see no reason the debt would not be discharged. The civil courts are not going to make a call on the criminal possibility if Billy is sued. If no leins were placed prior to the BK, even if the judgment itself survived the BK, there would be no means to collect on it.

[cyjeff]

would you mind explaining how this is true. I can see if they first proved he illegally gained the money and as such, not be dischargable via BK but merely to sue for the debt and be awarded a judgment, I can see no reason the debt would not be discharged. The civil courts are not going to make a call on the criminal possibility if Billy is sued. If no leins were placed prior to the BK, even if the judgment itself survived the BK, there would be no means to collect on it.

You are correct that most lawsuits will have an "automatic stay” of attachments against the OP. A “stay” means that all proceedings in the lawsuit are temporarily halted. A creditor needs to obtain “relief from the stay” in order to continue the lawsuit. Either party may also “remove” the lawsuit to the bankruptcy court, which might then either hear and decide the suit or “remand” it back to the original court.

However, if the lender is forced to go to court, they will surely site a criminal action as the reason for the stay being lifted. Criminal actions, lawsuits to establish paternity or other domestic relations actions (custody, visitation, domestic violence), litigation to collect child support or alimony, repaying a loan from certain types of pensions, and IRS audits are not stopped.

Therefore, a bankruptcy to try to stop a lender from filing criminal charges and then collecting those monies back from the OP as a penalty in the resulting case would survive the bankruptcy.

[jk]

The last time I was aware, BK courts do not have the jurisdiction to make the decision of an action being illegal or not. I always thought that had to be the result of a trial, after charges are brought by a DA. Once that is determined, there would be no escape but a mere claim cannot have the force of a court judgment.

am I misunderstanding the powers of the BK courts?

[aaron]

The lender doesn't have to initiate a criminal prosecution. They just have to prove to the satisfaction of the bankruptcy court that the debt at issue resulted from the fraudulent acts of the borrower.

(a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt -

* * *

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by -

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;

(B) use of a statement in writing -

(i) that is materially false;

(ii) respecting the debtor’s or an insider’s financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive; ...

* * *

[jk]

thanks Aaron.

you to cyjeff

That settles it:

BK aint's going to save Billy. He had just hope the lender does not want to see if criminal charges would be possible.

[B12]

Man, you guys really came through for Billy

I talked to Billy, and he has decided to continue paying his bills as he should; however, he did tell me that I miss represented the situation a little...

Billy said that he actually had two car loans:
1) For around $19,000
2) For around $50,000

He said that he actually only possessed car #1, and that he wanted to combine the loans into one loan, and use the money he received for car #2 to pay off the debt he accrued while he was in college. So, he told the bank he was going to trade someone both of his cars for one really nice car (#3), and that he just wanted to transfer the loans for cars #1 and #2 to one large loan for car #3.

So the bank just combined #1 and #2, and now Billy only has a loan for car #3, but Billy actually only owns car #1 currently. Billy plans on telling the bank that he sold car #2, and that car #3 got sold to someone else, so he used the money from #2 to pay off his unsecured debt, which Billy now knows was a no-no.

Is Billy still in big trouble? Should he just wait for the bank to change his loan into a consumer loan, or should he stop ignoring their letters and tell them the aforementioned story? They may let him use car #1 as collateral for loan #3, as that is better than no collateral at all, but he isn't sure, and doesn't want to give himself away if he doesn't have to. Should he wait until he receives something stating that they will be forced to take legal action if he doesn't respond?

Also, Billy inflated his 2008 salary a little to match what he was actually making in 2006 (he know has a lower paying job. Does this add wood to his fire?

I'm not sure if it matters or not, but Billy has really good credit, and has never even been late on one of his payments.

Thanks again for all the great help you guys are giving Billy

[jk]

he has a lot of problems, doesn't he?

If they are going to convert the loan(s) to a personal loan, then I would suggest this is all they intend to do. If they were going to do something else, I do not think they would bother with this step.

I don't think I would waive the red flag and draw attention to himself.