Bank did not put a lien on car. Car totalled and bank did not put a claim in.

[cbmmom5]

Hello, This is going to be a confusing post so thank you in advance if you stick with me to the end. Here is the situation.

My husband and I filed 13. We were recently confirmed. Car was in plan as a secured debt. The bank failed to perfect the title (didn't file a lien on the car.) Our paralegal said that it didn't matter, we still had to count it as secure. The courthouse also has no record that they filed the lien. I totalled the car four weeks ago. Insurance ready to pay. Trustee told about the situation. He vacated our conformation and said to take the car out of the plan. New plan was submitted without mention of car. We were going to have the insurance money sent to him. He told our lawyer that the money can come to us to put towards a replacement car. The lawyer told us that the bank is out of luck and that we can use all the money. I read somewhere that a bank with a lien does not have to file a proof of claim that the lien is enough.

Do you think the bank is out of luck?
Do they normally have to file a proof of claim or is the lien on the car enough? Which doesn't exist?
Did we still file bankruptsy against the bank since they are no longer in the plan and did not file a claim or a lien?
Since the car was taken out of the plan and no proof of claim was made, and no lien was placed on the car can we consider it as non secure?

Thanks for any feedback.

[justbroke]

Do you think the bank is out of luck?

Yes.

Do they normally have to file a proof of claim or is the lien on the car enough? Which doesn't exist?

Filing a claim is not enough. They have to show proof of perfection and that is usually by submitting a copy of the title showing them as lienholder.

Did we still file bankruptsy against the bank since they are no longer in the plan and did not file a claim or a lien?

Yes you did. They are now an unsecured creditor... if they actually file a claim before the claims bar date! If they fail to file a claim... the are out of luck!

Since the car was taken out of the plan and no proof of claim was made, and no lien was placed on the car can we consider it as non secure?

It's not considered "unsecured" because there is no claim and it's not in the "secured creditor" section of the plan. It's unsecured when there is no perfection of a lien within the rules of the underlying State non-bankruptcy laws. Generally, a lien on an automobile needs to be perfected within 30 days of the transaction.

I'm still wondering if your attorney needs to file a motion to avoid lien anyhow, just so there's an order and judgment.

(BTW, did you use an attorney or a paralegal to file? If you used a paralegal as a "document preparer" they should NOT have been giving you legal advice! (Noting that telling you that "it didn't matter, we still had to count it as secure" is tantamount to practicing law without a license and subject to sanctions and fines!) If this was just a paralegal preparing your docs, then they messed them up! If it was never perfected, the vehicle should have NEVER been on Schedule D and and should be exempted on Schedule C. Also, the Trustee is being VERY nice!)

[keepinitreal]

cbmmom5, sorry to hear you totaled your car! Hope you didn't get injured. I would say to trust your attorney's office and the Trustee to know what they're talking about. That is quite a gift to let you have the insurance money to replace your old car. Your previous car loan was definitely unsecured since the lender didn't perfect the lien. You had a very unique set of circumstances that won't be seen again soon I'm sure. Good luck car shopping!

[despritfreya]

Justbroke's comments are right on, but a Motion to Avoid the lien is not necessary if there was never a lien on the vehicle.

I wanted to add that for bk purposes, the lender was never a secured creditor since it had not timely perfected its lien. Once you found out about the lack of perfection, Schedule D should have been amended to remove the lender as secured and Schedule F should have been amended to add the lender as general unsecured. The Chapter 13 Plan should have been amended to remove payment.

Des.

[catleg]

Be thankful the bank wasn't listed as loss payee on your insurance policy, assuming you're in a no fault state!!

I've heard it speculated that even if the bank is on the title, if they're not on the insurance, and your car is totalled, and your insurance cuts you a check, then you still discharge the loan and keep the money. Of course the gap insurance would probably kick it, but it's fun to speculate.

[cbmmom5]

Thank you all very much for the responses to my post. Hopefully this will get figured out soon. Connie