Personal car loan - title still in seller's name

[KLee]

I am having a dickens of a time trying to figure out what to do about our car and car payments. We are filing without an attorney so I don't have anyone to ask. We are buying a car from a family friend and have paid $1500 so far in cash with $3000 still to go. The car is still in his name, he pays for the insurance and we pay him back for it. None of it is really official, we don't have a contract (although we are drawing up a simple one for the BK). How do I handle this? It's a debt, but is it secured or unsecured? It's not really a lease since we'll own it at the end, but right now it's not in our name so there isn't a lien of any kind. I'm just really stumped. Any suggestions?

[justbroke]

There are many issues with this as you already know. They should have given you the title upon purchase, some sort of promissory note, and listed themselves as a lienholder. I can't tell you what to do but I can tell you how it's treated in Florida. In Florida, ownership is always based on the face of the title. You are not the owner of the vehicle, and at worst, even if you do have ownership rights, there may be no lien based on your State's laws regarding motor vehicle titles. I'm not an attorney and motor vehicle titles are a tricky subject area... especially where there is unprotected equity and no apparent lien.

You may want to see if you can get the title and the promissory note and have the friend perfect the lien before filing. More importantly, even if they did perfect the lien albeit late, the lien could be subject to attack by the Trustee.

I recommend that you get several (3-5) free consultations with bankruptcy attorneys in your State. State law on titles is going to apply, and right now... you simply probably don't own the vehicle, under your State's law, so there's nothing to exempt in the bankruptcy.

I'm sorry that I can't provide much help, but liens should be perfected immediately and anyone buying a card from another person (family, friend, friend of friend) should always demand the title or at least that a title transfer is done. Your friend has so many liability issues right now and that alone would scare me (as the friend). (Unless your friend actually still owes someone for the vehicle... it's encumbered by a loan from a lender and that underlying loan is not paid off.)

[KLee]

Ugh, I knew it would be a mess. Thanks for your reply. See, we don't own a thing, literally nothing basically but our clothes, books, regular household items, laptop, and tv. That's it. I was thinking that they wouldn't take away our only vehicle? I know we don't own it, but if they take away this car then we have nothing.


Can this be seen as just borrowing the car or renting it? Would an attorney answer questions about this? There is absolutely zero way we could even pay for a cheap attorney. We have no option but to do this ourselves.

[justbroke]

Can this be seen as just borrowing the car or renting it? Would an attorney answer questions about this? There is absolutely zero way we could even pay for a cheap attorney. We have no option but to do this ourselves.

You should check to see if there's a Pro Bono or Pro Se clinic at your bankruptcy courthouse. Many bankruptcy courts now provide this for Pro Se debtors and the Pro Bono attorneys, at the clinic, will provide you with limited advice.

I just can't answer the "legal" question of whether it's legally or technically your car, or not.

[bcohen]

The trustee is going to do a DMV title search. No vehicle in your name means you legally don't own a car. I would keep my mouth shut, and not mention this car, which you are not the legal owner of, and won't be anytime soon (if ever). For all you know, your friend will never sign the title over to you anyways, so why complicate your bankruptcy unnecessarily?

Also, I fail to see where you are morally or legally obligated to mention this car. The bankruptcy estate consists of everything you own on the day you file--including money in a checking account which is already earmarked to pay for checks which are outstanding. You don't own a car, and won't own one on the day you file. The fact that you are paying someone money each month for the ongoing use of a car is not the bankruptcy trustee's business or concern.

[LadyInTheRed]

The trustee is going to do a DMV title search. No vehicle in your name means you legally don't own a car. I would keep my mouth shut, and not mention this car, which you are not the legal owner of, and won't be anytime soon (if ever). For all you know, your friend will never sign the title over to you anyways, so why complicate your bankruptcy unnecessarily?

Also, I fail to see where you are morally or legally obligated to mention this car. The bankruptcy estate consists of everything you own on the day you file--including money in a checking account which is already earmarked to pay for checks which are outstanding. You don't own a car, and won't own one on the day you file. The fact that you are paying someone money each month for the ongoing use of a car is not the bankruptcy trustee's business or concern.

Who a debtor pays money to before filing bankruptcy certainly is the trustee's concern.

What if the trustee sees the payments that have been made to the friend and asks what they were for? What if when the trustee hears the answer, s/he says that under state law KLee has an equitable interest in the vehicle that can't be exempted? Unless you are an attorney in whatever state KLee is in, you should not be telling KLee that it is okay not to say anything about the car. KLee may very well have a claim to the car, in which case the trustee may have a claim to it as well.