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  1. #1
    Join Date
    Feb 2016
    Posts
    6

    Default Selling a Vehicle When It is Still Subject to a Lien

    Hello everyone.. here is a little back ground on my situation..

    I bought a truck two years ago. I took out a loan from a local credit union. Clearly the loan was for the purchase of the truck. Therefore it had a lien on it. However like many loans that I have gotten from the same bank, the title has always come to me. Normally I sell the car or truck quickly and the bank is paid off in a few weeks to a month.

    In all cases the bank expected the title. Normally I never turn the titles over because I sold the cars so fast.

    In this current situation I bought this truck to keep and have been paying on time never missing a beat. When I got the title in the mail 2 years ago the title came in my name only, I kept it despite on rare occasions the bank requesting that I send in the title as soon as I can. They been polite and not pushy or demanding.


    I decided to sell my truck, and sold it to a dealer. They dealer obviously ran the vin to check out the history of the truck. It came up clear and clean as it should ( though it has a lien on it but only in my name)

    It was pretty straight forward. I owe $34,000 on the loan.

    My question is... what could the consequences be if it took one year to pay off the remaining balance rather than forwarding the full amount over right away.

    I am in no shape or form trying to get away with not paying .. I have excellent credit, though this may seem irresponsible, I am very responsible and reliable.

    I am not getting harassed from the bank, on occasion they ask that I update my current ins to reflect that they are the lien holder but it is through a 3rd party source that I receive that letter from.

    Thank you in advance for all your input

    Jon

  2. #2
    Join Date
    Sep 2010
    Posts
    19,061

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    What is the name of your state?

    If a lien is recorded, they can repossess if you don't pay. It matters not that you sold the truck to some sucker with a pending lien. Of course, that person can sue you for whatever misrepresentations you've made as to the fact that you owned the truck clear.

    You didn't bother to answer the VERY IMPORTANT question as to WHAT STATE. Depending on the state, the physical possession of the title may not be important in the least. The liens are often recorded electronically.

    Further, in most states you're breaking the law curbstoning. Often it takes only a disgruntled ripped off customer like you are proposing to have to bring your illegal activity to the attention of the authorities.

    What you should do is immediately and fully pay off the loan and get that lien released. This isn't the HOW DO I BREAK THE LAW AND RIP OFF PEOPLE forum.

  3. #3
    Join Date
    Jan 2006
    Posts
    38,648

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    I can see two probable crimes applicable to most states:

    fraud and conversion.

    Btw: in some states the lien holder holds the (physical) title until the lien is released. In others the owner holds the (physical) title even if there is a lien in place

    as ron said: that's irrelevant.

    A registered lien is little more than notice to a buyer there is an encumbrance against the title of the vehicle. If registered with the state, in most states, it will prevent the transfer of the title without the lien holders approval or release of the lien.

  4. #4
    Join Date
    Feb 2016
    Posts
    6

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    Im located in Connecticut... Its titled and registered in the state of Florida as it has been for a year. the first year it sat unregistered then the 2nd year i registered it and drove it for the year.

    The title never had the bank on it at all. The ins and registration is and has always been in my name only

    ONCE AGAIN im not trying to Dip out on the loan, I am paying it as I always have been. (by choice Ive been paying it $2600 a month) .. I was just asking what the consequences are if i just took a year to pay back the money ..

    If it was stolen or total loss due to damage and had the ins lapsed on the truck id be in a similar boat having to pay the loan correct?

    The dealer did a vin check before i sold it to them as i did with the last truck ( that truck i paid off right away) No liens not sure if it matters but this is a local credit union not a chain or big bank name.

    Ron .. I came here to ask a couple questions. The questions are legitimate. No one is trying to rip anyone off as i stated that I was going to continue to pay on the truck. Its only been a couple days since the sale of the truck. Had there been a lien on the truck the dealer would have gotten that information right away

    I also understand when bringing things like this to a "forum" i open myself up to criticism and rude judgmental behavior such as what your giving me.

    Therefore Ill ask the question once again

    If a person continues to pay on the vehicle, one that has a clean and clear title that was sold.... and they take a year to pay the remaining balance in full, could there be consequences.
    ..

  5. #5
    Join Date
    Jan 2006
    Posts
    38,648

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    So you didn't bother to comply with the laws of Connecticut and convert the Florida title to a Connecticut title. That is a problem in itself.

    You need to read your loan contract. Most have a due on sale clause. If you're does, then you owe the balance of the loan now if you hide the fact you sold the vehicle, we're possibly looking at fraud.

    As to the; if it was damaged issue


    most contracts require you maintain insurance on a vehicle that is security for a loan. If you did not carry the required insurance it would be a breach of contract and allow the lender to make a demand you cure the issue. If you fail there are usually clauses that allow them to call the loan due immediately.


    Whether there could be consequences will be based on your loan contract. At best the vehicle is not actually security for the loan. Personal loans are what they are. At worst your actions are criminal. Fraud and/or conversion are still the crimes I see as possible.

  6. #6
    Join Date
    Mar 2013
    Posts
    16,968

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    Quote Quoting Jons1971CT
    View Post

    If a person continues to pay on the vehicle, one that has a clean and clear title that was sold.... and they take a year to pay the remaining balance in full, could there be consequences.
    ..
    Assuming that there is no lien by the lender and the title really is clear I'm not sure I foresee any of the nightmarish scenarios postulated by the others.

    Whether anything bad will happen depends on the terms of your loan contract.

    If the loan contract was secured by the vehicle and required you to submit the title at the getgo then you were already in breach back then but the lender has apparently let that slide.

    If the loan contract has a due on sale clause (which it likely does) and you don't pay the balance in full you can be sued for breach of contract and get a judgment against you for the entire balance plus the lenders court costs and attorney's fees. Count on that adding many thousands of dollars to the debt and having your credit score go down the toilet.

    Once you get sued, the lawsuit stays on your record even if you get it dismissed by paying in full.

    I don't know what kind of advantage you think you'll have by pocketing the dealer's money and paying off the loan in a year (and I certainly have no problem with people taking advantage of loopholes) but it seems to me that the risk of a lawsuit (and its consequences) far outweigh any benefit you might derive.

    On the other hand, the lender might never take any action as long as it's getting its money every month and you might skate.

    My advice: Pay it now.

    You don't know what kind of financial debacle might befall you later that would make you default on the payments and then the s--t will hit the fan.

    Up to you.

  7. #7
    Join Date
    Feb 2016
    Posts
    6

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    Thanks for the input adjusterjack.. good information..

    The only reason why I considered this route is because the lender has let it slide for so long and seems satisfied as long as the loan is being paid timely. I think at worst if they were to find out, it would be easy to just fork over the balance before "said sh-t" hit the fan... no harm no foul especially since that has been the history I have had with them... buying and selling (then paying the loan in full)

    For sure something to think about....

  8. #8
    Join Date
    Sep 2005
    Location
    Behind a Desk
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    98,846

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    Quote Quoting Jons1971CT
    View Post
    In all cases the bank expected the title. Normally I never turn the titles over because I sold the cars so fast.
    But there is no question but that the lender has a purchase money security interest in the vehicle, and there is no question but that you are contractually bound to provide the title to the lender such that the lender can perfect its security interest.
    Quote Quoting Jons1971CT
    It came up clear and clean as it should ( though it has a lien on it but only in my name)
    Right... because you knowingly and intentionally breached your contract with the lender in order to avoid the appearance of their lien on the title.
    Quote Quoting Jons1971CT
    My question is... what could the consequences be if it took one year to pay off the remaining balance rather than forwarding the full amount over right away
    Among the many possible futures you could encounter.... If you continue to make payments on the vehicle and then, at the end of the year, pay off the balance of the loan, it's possible that the lender will not learn that you sold the vehicle and will simply accept the payoff. It is possible that they will treat your continued failure to allow them to secure their lien as a breach of contract, accelerate the loan, and demand payment in full. It is possible that they will deem you to be in breach of your contract, attempt to repossess based upon their purchase money security interest, and find out that you committed further breaches both by selling the secured property, by failing to inform them of the sale, and by failing to pay them the money you owed to them upon sale.
    Quote Quoting adjusterjack
    View Post
    Assuming that there is no lien by the lender and the title really is clear I'm not sure I foresee any of the nightmarish scenarios postulated by the others.

    Whether anything bad will happen depends on the terms of your loan contract.
    It's a car loan and a professional lender, so it's more than safe to assume that the contract requires the borrower to promptly provide all information and documents necessary for the lender to perfect its lien, that it requires that the borrower maintain collision insurance on the secured property, that it requires the borrower to promptly inform them of any loss of or transfer of the secured property, and that the failure to comply with the terms of the contract can result in the acceleration of the loan and repossession.

    I would expect that if the lender finds out about the borrower's breaches of the contract, or perhaps even if they tire of his refusal to allow them to perfect their lien, they will start by accelerating the loan and asking for payment in full. But if they don't receive payment, or if they attempt to repossess and find themselves frustrated in that effort by virtue of the borrower's sale of the vehicle, both Florida and Connecticut have statutes criminalizing the act of attempting to defraud a secured party. Connecticut Statutes, Sec. 53-129a; Florida Statutes, Sec. 817.562. My personal approach would be to pay off the debt; if I were at all inclined not do do so immediately, I would certainly continue to make all payments and be prepared to pay off the debt in full upon the creditor's first demand.

  9. #9
    Join Date
    Jan 2006
    Posts
    38,648

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    And if the lien is registered with the state, the dealer is about ready to come knocking on your door looking for answers and when I say answers I really mean money.

  10. #10
    Join Date
    Feb 2016
    Posts
    6

    Default Re: Title in Hand with Lien, Sold the Truck Continuing to Pay Auto Loan

    Quote Quoting Mr. Knowitall
    View Post
    if I were at all inclined not do do so immediately, I would certainly continue to make all payments and be prepared to pay off the debt in full upon the creditor's first demand.
    I was thinking if I maintained payments as I normally would, where would the "ALARM" be? they would just accept payment and keep moving forward... That being said, I would be like you said as soon as they came calling I would just produce payment in full.

    I can see if I didn't maintain the upstanding payment history or I refused to make a single payment going forward, then I can see getting into trouble. I was thinking at worst they would initially ask for the loan to be paid in full ASAP.. and I would oblige.

    Nothing could really be brought against me per-say.. or maybe so but in most cases people just want to be paid and in this case they would just ask for the money.
    Also if I kept the truck I'd be still making the payment, they still wouldn't have the title and still wouldn't know if i sold it or not, they haven't asked me for the title in a long time.. (not that that is ok) just mentioning it for the record.

    Again .. I want to pay, I am going to pay, I'm actually able to pay it off faster buy selling the truck (loan was for 4 more years, If I decided this route it be paid off in 12 months or sooner)
    Knowing my situation in further detail is irrelevant and for the purpose of the Judgemental readers, I am not on drugs nor do i have gambling loans etc.

    I work every day, I have a family and otherwise an upstanding person. I guess I'm just looking at it as floating money for so many months.

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