November 20, 2017

Car Titles and Chapter 13

return of vehicle titleAn issue that that seems to arise in more and more Chapter 13 cases has to do with the release of car titles.  Even when the vehicle lender has been paid in full in the Chapter 13, there seems to always be a delay or problem getting the vehicle title released back to my client.

It seems that vehicle lenders are taking the position that they do not have to release a vehicle title back to the bankruptcy filer until the case is over, instead of when the lender is paid in full.  In my view, lenders are acting improperly when they do not return my client’s title, and in most cases they will back down, although it may take a letter or a phone call from me.

As you probably know, Chapter 13 modifies the installment contract between a debtor and his vehicle lender.  In effect, Chapter 13 allows a bankruptcy filer to refinance his vehicle loan.  In a recent case I filed, for example, my client owed $12,000 to her lender and was paying over $450 per month, with just under 2 years left on the loan.  I proposed a Chapter 13 plan that paid $275 per month to the lender.  The lender was going to be paid in full but under my plan, it was going to take just over 4 years to get the lender paid.  The Chapter 13 plan also set out an interest rate for the payout.

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