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  1. #1
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    Apr 2010
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    Question Bankruptcy and Car Title Ownership

    My question involves vehicle registration or title in the state of: Minnesota.

    Not sure if this thread is in the right place, admins feel free to move it if it isn't. Basically, I went through a Chapter 7 bankruptcy that was finalized sometime in early 2012. At that time, an un-named large bank owned my car title. 5-6 years prior to this, I used my then paid off car, as collateral for a loan to pay off some tax debt. At the time of bankruptcy filing, that loan had roughly $5000 left on it, yet the car was worth less than $2500 at that point, which is why I was allowed to keep it. At the meeting of the creditors, nobody showed up (as expected) and the bankruptcy was official several months later. My main question is: Since the bank decided not to challenge this debt at the meeting of creditors, and the loan debt was discharged upon finalization of the bankruptcy; does the bank still have the right to keep/own the title, or should I be able to get it without a hassle? I'm getting close to purchasing a newer car within the next couple months, perhaps several weeks, and it would be ideal to have the title in-hand to use my car as a trade in. It is currently sitting in a transmission shop parking lot with hopefully just a broken drive shaft ($290 total fix) or at worse case scenario, a fried transmission. If it the latter of the 2, I will not even think of getting it fixed. So tomorrow the shop will diagnose the problem, and if it's the transmission, what can I legally do with this car? It is currently un-drivable.

    Any help is appreciated.

    Thanks

  2. #2
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    Default Re: Bankruptcy and Car Title Ownership

    Quote Quoting TwinsFan
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    My main question is: Since the bank decided not to challenge this debt at the meeting of creditors, and the loan debt was discharged upon finalization of the bankruptcy; does the bank still have the right to keep/own the title, or should I be able to get it without a hassle?
    The bank is prohibited from attempting to collect the debt.

    It has absolutely no obligation to cooperate with you in releasing the title.

    Read the following article by a MN attorney:

    http://www.bankruptcytruth.com/minne...want-surrender

    Seems to me that you are stuck, unless you want to voluntarily offer some cash to the lender in exchange for a lien release. You might get lucky if the lender figures some cash is better than no cash. Or you might not.

  3. #3
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    Default Re: Bankruptcy and Car Title Ownership

    Thanks adjusterjack. Not the news I wanted to hear, but it is what it is I guess. I'm assuming that asking the lawyer to file a motion would be separate from what he did during the bankruptcy process and I would essentially have to "hire" him again to do this, correct? If I decided to stop into the branch where I signed all the loan papers/title transfer, is this something a personal banker could handle, or should I be looking for the bank manager?

  4. #4
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    Default Re: Bankruptcy and Car Title Ownership

    Quote Quoting TwinsFan
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    Thanks adjusterjack. Not the news I wanted to hear, but it is what it is I guess. I'm assuming that asking the lawyer to file a motion would be separate from what he did during the bankruptcy process and I would essentially have to "hire" him again to do this, correct?
    That would be my guess but it couldn't hurt to ask him if he could include it for free and if not, how much.

    Quote Quoting TwinsFan
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    If I decided to stop into the branch where I signed all the loan papers/title transfer, is this something a personal banker could handle, or should I be looking for the bank manager?
    I doubt that those decisions get handled at a branch level. The auto loan department is probably centralized somewhere else.

    However, a personal banker or branch manager might be able to get you the name and phone number of a decision maker rather than having to deal with a customer service bureaucrat on the phone who will just say no. Although there's no guarantee that a decision maker won't say no.

    PS: In the past I've been able to get a wrecking yard to pick up a car with no title. The car was junk and they didn't pay me anything but I was happy to get it removed for free after I took parts off it. There will probably be people who say it's a bad idea in your situation and I'm not telling you to do it, just that it might be do-able.

  5. #5
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    Default Re: Bankruptcy and Car Title Ownership

    I actually had talked to him on the phone a little over a week ago and he was going to look into it. Haven't heard back from him yet, which is why I started this thread. I will email or phone him tomorrow and see what he's found out if anything, and how much it would cost me for him to file a motion against the bank. Hopefully I get the good news from the auto shop tomorrow too because I'll be able to drive the damn thing for a while while all this legal stuff gets sorted out. Plus that would equal a trade-in vs salvaging or junking it when I get a new car.

    Per the article you linked me to, I also hope that this has changed by now for the state of MN..

    "One court in New England has found that when the lender refuses to repo the vehicle or release the lien, they are violating the bankruptcy discharge. This is not the rule in Minnesota as of June 18, 2012, but maybe that will change in the future."

    Either way, thanks for all your help. I appreciate it greatly. It isn't too much fun not having a car to drive, even though I only live 3.5 miles from work. I'll post again what I find out from the lawyer, bank, etc..

  6. #6
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    Default Re: Bankruptcy and Car Title Ownership

    Quote Quoting TwinsFan
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    Per the article you linked me to, I also hope that this has changed by now for the state of MN..

    "One court in New England has found that when the lender refuses to repo the vehicle or release the lien, they are violating the bankruptcy discharge. This is not the rule in Minnesota as of June 18, 2012, but maybe that will change in the future."

    I got curious and did a little research.

    The vehicle lien case was Pratt v GMAC (2006) in the US Court of Appeals First Circuit. The court ruled that GMAC's refusal to release the lien was "objectively coercive" under the circumstances of that particular case:

    https://law.justia.com/cases/federal...462/14/524992/

    That same court, in Canning v Beneficial (2013), found no such violation when a mortgage company refused to release its home mortgage lien. The Cannings relied heavily on Pratt in their appeal so the court went to great lengths to explain the difference (starting on Page 14 if you don't want to read all the background):

    http://bankruptcyrealestateinsights....-9002p-01a.pdf

    Seems to me that your situation might parallel Pratt's.

    While a decision in the First Circuit might not be precedential to the Eighth Circuit (MN et al) the logic of the Pratt decision might be persuasive.

    You might ask your bankruptcy attorney to review Pratt for any possible validity in MN or to determine whether there have been any similar decisions in MN. My quick search didn't come up with any but lawyers have subscription case search facilities that work a lot better than what I can find on the internet.

  7. #7
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    Apr 2010
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    Default Re: Bankruptcy and Car Title Ownership

    Yes the Pratt case could prove beneficial, especially if I get bad news from the shop today. I will definitely mention that to my lawyer when I talk to him. Thanks again. The car is only blue-booking between 6-$800 if it drives.

    - - - Updated - - -

    Quote Quoting adjusterjack
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    Seems to me that you are stuck, unless you want to voluntarily offer some cash to the lender in exchange for a lien release. You might get lucky if the lender figures some cash is better than no cash. Or you might not.
    A little update. Got the car back in driving condition today thank god for $275 out the door. I then proceeded to the bank (original lender) and the personal banker's records showed that the loan was still open on his end. We dug a little deeper and found out that the case was sold to debt collector company, and then I assume was discharged during the bankruptcy. The banker then called the company and I talked to a lady who worked there. She asked for my VIN #, car year, make and model, and a contact phone #, which I then gave to her. She said she would forward this info to another person/branch of their company for further review. Does the fact that the bank no longer owns this title, and it's likely in the hands of the debt collector change this situation at all, or does the debt collector become the new "lender" in this case?

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