The first time I had a client advise me that their car was paid off, but that they had a title loan against it, I was a little bit confused. After wading through the confusion and ascertaining a few facts, the story became clear. Now that I’m an experienced southern California bankruptcy attorney, it’s a story that I have heard repeated countless times. It comes up too often to be ignored. The confusion leaves people responding inaccurately and not in their own best interests.
Here are the facts as they usually occur in this particular story.
- You paid off your car loan.
- You received the pink slip (the car’s title). This is evidence that you are the legal owner of the car.
- You found yourself in need of money.
- You pledged your car as security for a loan.
- The lender required that you sign over the pink slip. (This effectively removes your name from the title and gives it to the lender).
- You are still the registered owner of the vehicle with your state’s Department of Motor Vehicles, but the LENDER now owns the vehicle.
- To become the owner again, you must pay off the loan.
- From this point forward, the lender can repossess the car for failure to pay on the loan.
I’m a southern California bankruptcy attorney. So at this point in the story, if I’m the one hearing it, there’s one more aspect to the tale that makes it more interesting and more confusing.
- You filed for bankruptcy.
- You included the creditor who holds your pink slip in your list of creditors.
- You received your bankruptcy discharge.
The confusion comes in at this point. Did the bankruptcy wipe out this debt or not? Why is the lender still waving that pink slip around and demanding that you pay them or lose your vehicle?
The bankruptcy DID wipe out the debt to the lender. You are not responsible for paying the loan. But it does NOT wipe out the lender’s security interest (your vehicle). To get the lender to sign back the title, you have to pay off that loan or make some other type of negotiated settlement with the holder of the pink slip.
If you have more post-bankruptcy questions regarding filing for Chapter 7 bankruptcy and what is and is not taken care of with your bankruptcy discharge, contact the southern California bankruptcy attorneys at Westgate Law.