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  1. #1
    Join Date
    Jan 2019
    Posts
    5

    Default If You Receive the Title is a Car Loan a Secured or Unsecured Debt

    My question involves a consumer law issue in the State of: WA

    I bought a pickup about 3 years ago, and about a two years ago received a clear title in the mail. I thought not to much about it and filed it away, well do to financial difficulties I had to file chapter 7 bankruptcy about a two months ago. Well i wanted to keep the pickup so the attorney was going to have it reaffirmed. After about a month or so after attorney contacted the bank to see what hold up was, still no reaffirmation, the bank said they were having a tittle problem, i told my attorneys that is because they sent me the title two years ago. They then sent my attorney a reaffirmation paper for the pickup and a Release of Interest/power of attorney to be notarized. My question is this now a unsecured debt i can file on and keep pickup, my attorney does not seem to know for sure. And i do have enough wild card money to apply to equity to protect from trustee.

    Thanks
    Tom

  2. #2
    Join Date
    Mar 2013
    Posts
    16,793

    Default Re: Secured or Unsecured Debt

    Go to the DMV office and see if there is a lien on record with the DMV. If there is, it doesn't matter that you think you have a clear title.

    If there isn't, the lender's lien might operate as a matter of law, not by contract. The lender might still be entitled to the truck if you discharge the loan. Your lawyer ought to be able to figure that out. If he can't, the safest thing for you to do is reaffirm.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,169

    Default Re: Secured or Unsecured Debt

    Quote Quoting adjusterjack
    View Post
    If he can't, the safest thing for you to do is reaffirm.
    I'd say reaffirmation of a vehicle debt in most cases is a bad idea. The lender doesn't want the car, it won't pay off the loan. If the debtor continues to just pay the loan, the lender is probably going to be content to keep collecting the payments and let the debtor keep the vehicle even without affirmation. It's the best shot the lender has to get paid off. It can always repossess later if the payments do not get made, assuming the lien is still good. If the lien isn't good, then there is even less incentive to reaffirm the debt.

    And should the lender take the vehicle in the bankruptcy, so what? If there is negative equity in it, you're dumping a vehicle that has no value to you and getting rid of the debt. You can start over with another vehicle and not be stuck in a financial hole.

  4. #4
    Join Date
    Jan 2019
    Posts
    5

    Default Re: Secured or Unsecured Debt

    Hey thanks guys really appreciate you taking the time to answer this subject, it is a unusual situation. My attorney is very experienced but its kind of perplexing to him also. that is a good idea to check with DMV. I have till the 28th to reaffirm any debts. I am not going to reaffirm and hope for the best, I will defiantly check with DMV. The document the bank sent me is TD-0509 (R/3/10)W Release of Interest/Power of Attorney, if you wanted to look at it.
    Thanks again.

  5. #5
    Join Date
    Jan 2006
    Posts
    38,439

    Default Re: Secured or Unsecured Debt

    You need to understand the security interest is due to the loan contract, not the lien filed on the title. The lien registered in the title is merely a mechanism to prevent the owner from selling the vehicle without the lenders approval.

    Check out your contract but chances are you will find the car listed as collateral for the loan. If true, whether the lien is registered on the title or not doesn’t remove the security interest imposed by the contract.

  6. #6
    Join Date
    Jan 2019
    Posts
    5

    Default Re: Secured or Unsecured Debt

    That sounds very reasonable, but my only question is... if they have all this going for them, why would they need me to sign the document they sent me. If they in fact have all that it seems they could just simply get a new title.
    Just wish it was black and white but seems like a kind of weird grey area lol.
    thanks Jk

  7. #7
    Join Date
    Oct 2006
    Posts
    15,218

    Default Re: Secured or Unsecured Debt

    Quote Quoting Taxing Matters
    View Post
    I'd say reaffirmation of a vehicle debt in most cases is a bad idea. The lender doesn't want the car, it won't pay off the loan. If the debtor continues to just pay the loan, the lender is probably going to be content to keep collecting the payments and let the debtor keep the vehicle even without affirmation. It's the best shot the lender has to get paid off. It can always repossess later if the payments do not get made, assuming the lien is still good. If the lien isn't good, then there is even less incentive to reaffirm the debt.

    And should the lender take the vehicle in the bankruptcy, so what? If there is negative equity in it, you're dumping a vehicle that has no value to you and getting rid of the debt. You can start over with another vehicle and not be stuck in a financial hole.
    The exception to that would be if the car payment was reasonable and the mileage was low or moderate. The odds of being able to finance another car shortly after bankruptcy would be slim, so reaffirming a reasonable car payment would be quite wise.

  8. #8
    Join Date
    Jan 2019
    Posts
    5

    Default Re: Secured or Unsecured Debt

    That is true in my case, i have a low interest rate and i owe a little bit more then its worth not to bad. My big question is does this now make the loan unsecured? my attorney is not really sure. He is an experienced bankruptcy attorney but has not seen anything like this. After I do not reaffirm the debt, what happens next? after the discharge is the grey area. The earlier comment by senior member Jk makes since also but even with that I am not sure. Question is did the bank really screw up by not correcting this two years ago and now while in chapter 7 is the debt wrote off as any unsecured debt and i am able to keep the vehicle.
    Thanks llworking

  9. #9
    Join Date
    Jan 2006
    Posts
    38,439

    Default Re: Secured or Unsecured Debt

    My big question is does this now make the loan unsecured?
    not having your contract or any other official document I can’t say for sure but most likely it remains a secured loan. As I said, the security interest attaches because of some function of the contract.

  10. #10
    Join Date
    Jan 2019
    Posts
    5

    Default Re: Secured or Unsecured Debt

    Ok jk i guess the next move is to find my contract lol.

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