Is my car at risk?

[Kirby]

I borrowed $24K from my dad to buy a new Honda in 2007. KBB value is now $22K, still owe Dad $11K. Pink slip is in my name so it looks like I own the car outright but I can prove monthly payments to Dad and have a Promissory Note for the loan. Does anyone here know how this will be looked at? Thanks everyone . . .

[backtoschool]

If your dad does not have a perfected lien on the car, and your name is the only name on the title, and the title is free and clear, then the car will be an asset for bankruptcy purposes, and your payments to your father will just be another debt on your schedule.

Without your father's name anywhere on the title or without any perfected lien, your payments to your father will not be formally tied to the car. The car right now is not a secured asset if you have a a free and clear title and no perfected liens.

Your father's loan to you right now is unsecured debt, and will be treated as such by the trustee unless your father has a perfected lien and has his name on the title.

[Kirby]

If your dad does not have a perfected lien on the car, and your name is the only name on the title, and the title is free and clear, then the car will be an asset for bankruptcy purposes, and your payments to your father will just be another debt on your schedule.

Without your father's name anywhere on the title or without any perfected lien, your payments to your father will not be formally tied to the car. The car right now is not a secured asset if you have a a free and clear title and no perfected liens.

Your father's loan to you right now is unsecured debt, and will be treated as such by the trustee unless your father has a perfected lien and has his name on the title.

Thank you, backtoschool. Oh dear. "Perfected lien." I'll google it but it sounds like it won't be easy to keep my dad out of this. Can I expect that the car will be taken away from me to pay him back? Thanks again so much...

[StartingOver08]

Thank you, backtoschool. Oh dear. "Perfected lien." I'll google it but it sounds like it won't be easy to keep my dad out of this. Can I expect that the car will be taken away from me to pay him back? Thanks again so much...

It sounds like the car has no loan on it at all except for the one that you repay to your Dad, right? If you can't exempt it and can't show that it has a perfected lien, then it will be taken from you to pay all the creditors back, not just your Dad. Discuss this with your attorney. Have you filed yet or are you contemplating filing?

[Kirby]

Should I sell my car?

It sounds like the car has no loan on it at all except for the one that you repay to your Dad, right? If you can't exempt it and can't show that it has a perfected lien, then it will be taken from you to pay all the creditors back, not just your Dad. Discuss this with your attorney. Have you filed yet or are you contemplating filing?

StartingOver08 - you are correct - no loan except between my Dad and me. I have not filed yet but it is imminent as I have no more money to pay anybody. Should I sell the car? My primary concern is to keep my Dad from being affected by my financial problems. Thank you . . .

[tcreegan]

unsecured to secured creditor

Hello Kirby,

Move Dad from unsecured creditor to secured creditor before you file.

Get Dad to place a lien on the vehicle. Go with him to the DMV, take the promissary note. Get a new title showing Dad as a lienholder.

Now Dad becomes a secured creditor. When the bankrutpcy trustee sells the vehicle, Dad gets the first $11K (what you owe him)

You get whatever the Calif vehicle exemption is; around $3K if I remember right.

The rest $22K - $11K - $3K = $8K will be distributed to your unsecured creditors.

Do NOT sell the car and give Dad his $11K This is called an "insider" payment and the bk trustee will take it back from Dad and spread it over all the creditors.

Do NOT sell the car and keep the money. The bk trustee will want to know where the $$ went and go after it.

Hope this helps,

Tom in Colo

[keepmine]

Don't make any moves on this until you speak with a lawyer.
The problem with having Dad perfect the lein now is, in many states there is a short period of time after the sale where the lender is required to perfect the lein. I think the UCC allows 20 days.

[Kirby]

Hello Kirby,
Move Dad from unsecured creditor to secured creditor before you file.
Get Dad to place a lien on the vehicle. Go with him to the DMV, take the promissary note. Get a new title showing Dad as a lienholder.
Now Dad becomes a secured creditor. When the bankrutpcy trustee sells the vehicle, Dad gets the first $11K (what you owe him)
You get whatever the Calif vehicle exemption is; around $3K if I remember right.
The rest $22K - $11K - $3K = $8K will be distributed to your unsecured creditors.
Do NOT sell the car and give Dad his $11K This is called an "insider" payment and the bk trustee will take it back from Dad and spread it over all the creditors.
Do NOT sell the car and keep the money. The bk trustee will want to know where the $$ went and go after it.
Hope this helps,
Tom in Colo

Thanks so much Tom. This is exactly what I needed to know. My hopes of keeping my dad uninvolved are fading fast but this information is better than not knowing. Thanks again.

[Kirby]

Don't make any moves on this until you speak with a lawyer. The problem with having Dad perfect the lein now is, in many states there is a short period of time after the sale where the lender is required to perfect the lein. I think the UCC allows 20 days.

Thank you - I'll be speaking to a lawyer this coming week. Really wanted to keep my dad out of this. Damn.

[NewDawn]

There are 2 sets of exemptions in California. I don't know if you have any real estate or not. I do know under the system 2 set of exemptions, you can use any unused homestead exemption as well as a wildcard. I don't know what other property you have, but it can make a difference. The homestead exemption amount is 17,425 and the wildcard amount is 925, according to what I just researched online. So be sure to ask the lawyer about this.

[mrskal]

Question on something similar...I am still looking at buying a new car. My dad my just buy it for me and I will pay him. If I dont go on title right away, will it have any bearing on me filing a CH7? I guess probably not, since no one would even know I am paying him for it. I have been shopping around and the interest rates for us are coming in at about 16%, I dont need a new car that bad!

[keepmine]

Question on something similar...I am still looking at buying a new car. My dad my just buy it for me and I will pay him. If I dont go on title right away, will it have any bearing on me filing a CH7? I guess probably not, since no one would even know I am paying him for it. I have been shopping around and the interest rates for us are coming in at about 16%, I dont need a new car that bad!

Your post is a bit confusing. If, you buy it prior to filing and start making payments you will be required to list it as an asset and list your father as a creditor. If he doesn't properly perfect the lein you 2 will be in the same boat as the OP.

I'm of the opinion that, you ought never to drag others into your financial issues.
I'd make do with a beater until the bk is discharged and then you and your Dad can do whatever you please.

[NewDawn]

In other words, your dad is buying a car that will be titled in his name only because he can get a better interest rate than you as far as financing? You will be paying him the payments and then once you pay him in full, he will change title to your name?

[mrskal]

NewDawn, sorry if that was confusing. I have a feeling he would just buy the car outright, and I would pay him. He wont charge me interest most likely. Yes I was thinking he can title it in his name, and we can change it later.

That would not make it an asset of mine really. He knows about me filing BK so it is not like I am trying to hide anything.