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  1. #1
    Join Date
    Dec 2014
    Posts
    1

    Default Discharging a Debt for Car Repairs After Keeping the Insurance Monay

    My question involves bankruptcy in the state of: hawaii

    Hi all,

    So I would like some opinions on this:

    Our auto insurance company sent us a check for approx $3000 which my wife promptly cashed (total repairs ended up being approx $6000). After we got our car repaired the auto body shop gave us our car back after we payed our deductible. The insurance company payed the auto body shop for repairs minus the amount they sent us ($3000). Of course the auto body shop is now looking at us to receive the full payment.

    The twist here is I'm filing for bankruptcy and don't have the money to pay them. What is the auto body's course of action here? Is it to sue me for the difference? Do they have a case? Or can I write this off in my bankruptcy?

    Thanks for any answers.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Cashed Insurance Check Still Owe Auto Shop

    Well, depending on the exact situation they can possibly lien the car. They certainly have status in the bankruptcy proceedings. You haven't indicated what sort of bankruptcy you're filing for. Is there any other liens (loans) on the car?

  3. #3
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: Cashed Insurance Check Still Owe Auto Shop

    Not only could the shop have a claim against the car but the owner's could also file an adversary action in your bankruptcy that would delay the bankruptcy for a while and cause the debt to the shop to be ruled non-dischargeable.

    In fact, (worst case scenario) your whole bankruptcy could go up in smoke because you defrauded a creditor.

    Your wife did a really stupid thing. If you still have the money, I strongly suggest you pay the shop before the SHTF.

  4. #4
    Join Date
    Sep 2005
    Location
    Behind a Desk
    Posts
    98,846

    Default Re: Discharging a Debt for Car Repairs After Keeping the Insurance Monay

    A mechanic gains a statutory lien against a repaired vehicle:
    Quote Quoting Hawaii R.S. Sec. 507-18. Lien on personalty for work done and materials furnished.
    A person who makes, alters, or repairs any article of personal property at the request of the owner of the property, shall have a lien on the property for the reasonable charges for the work done and materials furnished, excluding storage charges, and may retain possession of the property until the charges are paid; provided that the registered owner of a motor vehicle registered pursuant to chapter 286 shall be considered the owner for the purposes of this section.
    Normally that lien is used to retain a vehicle pending full payment for repairs, but nothing in the statute suggests that the lien expires when the vehicle is returned to the owner. Bankruptcy will not ordinarily remove a statutory lien.

    We don't have enough information to know why the initial payment for repairs was sent to you, why you did not pay that money to the repair shop, or why the repair shop believed that they would still be getting full payment from the insurance company when it released the car. It is possible that in the course of the events you committed acts that a bankruptcy court might deem to be acts of fraud, such that the debt becomes nondischargeable.

    As you probably don't want to share that level of detail with us, here in public, I suggest that you discuss this matter with your bankruptcy lawyer.

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