How long for trustee to determine Asset vs No Asset..?

[sh9730]

Hello all,

This one may be a Des specific question since this issue (from what I read) crops up in AZ more than elsewhere, but if anyone has answers Im open to them!

As I ve posted before I purchased to vehicles in December 2010, on my SOI I indicated one I would try to reaffirm and one I would surrender. I actually tried to do a voluntary repo on it BEFORE I filed, and then after I filed I got all the paperwork signed to work with the lender to surrender it ASAP as the vehicle is not in my physical posession (ex girlfriend) and Im still paying insurance on it etc....

BUT, the lender wouldnt take the vehicle back pre-341 saying something about needing to wait for a report of no distribution, asset abandonement. SO, I waited....didnt really understand why, until later in the process I read an article where in AZ especially (but could apply anywhere I suppose), when lenders are not "perfecting" the lien on new cars within the 20 day legal window after purchasing (this is done by filing the proper paperwork with DMV), the trustees are considering the lien not good and consider the vehicle an asset of the estate, even if there is no equity. AND as I understand it (I could be wrong here though), this issue applies even if the lien IS recorded before the BK filing but was after the 20 day legal window.

SO, I assumed this was why the lender wouldnt accept the vehicle, as they noticed it took long to perfect. In my case it was almost 6 weeks before I got the plates and the lien was recorded.

Well, I notified my attorney that this might come up and he sort of dismissed it since it doesnt directly affect my discharge. I explained that I understand that, but its important as I want to get rid of that car ASAP to either the bank, or the trustee rep. Plus of course it will affect my CLOSING of the case.

Sure enough, had my 341 last Friday 6/3, and everything went well except the trustee did in fact say he was going to "check on the lien perfection on the vehicle", this was without me or my attorney bringing it up at all...


SO, all this brings this to my couple of questions:

#1 - Do I understand this correctly, that even if the lien was filed before I filed the petition, that if it took more than 20 days for the lender/dealer to do get it filed, the trustee can try and make it an asset of the estate?

#2 - In any case, how long should I give the trustee to invstigate all this? Again, I understand it does not affect my discharge, but I was hoping not to have to pay another 100.00 for the next months insurance on the thing! Plus, Im not 100% comfortable since the car is not in my posession and is out of state. She says she will turn it in when the time comes, and I have no reason not to believe her....but, I ll feel better when its all done.

Any thoughts from anyone? (sorry for the length!)

[despritfreya]

sh,

I wanted to "subscribe" to this post so it would not get lost for me. I will respond later today regarding your 2 questions. . . at least to the best of my ability.

Des.

[despritfreya]

You are correct that trustees, throughout the country, are looking at the proper perfection of liens. You are also correct regarding the 20 day issue. You mentioned that you read an article on the subject. I do not know which one but. . . Here is a really good one:

http://www.jsslaw.com/newsletter_details.aspx?id=21

My recommendation, since you do not wish to maintain insurance on the vehicle. . .

Send a certified letter to the Trustee asking him about the status of his investigation regarding the lien. Tell him the exact location of the vehicle. Tell him you have tried to get the lender to take possession of the vehicle but it will not do so without an abandonment. Tell him that you can no longer afford to pay for the insurance therefore either he needs to secure the collateral or abandon it so that the lender can recover it. Tell him that if you do not hear from him by the time the insurance expires (give a date certain) you will not pay the premium and the vehicle will be uninsured. Copy this letter to the US Trustee (certified as well). Keep a copy of the letter and the green cards when they come back. My guess is that you will hear from the Trustee within a week of the date of your letter.

Des.

[sh9730]

Thanks Des. I will look into that with my attorney. Of course, always leary to draw attention to my case with the Trustee, or especially with the UST! But, Im not hiding anything, so I guess it cant hurt....

Thanks.

P S - That was the article I was speaking about....and it is very well written.

[sh9730]

Des,

I just re-read that article. It talks about POST PETITION attempts to perfect liens, but nothing really specific about those lenders who violate the "20-day" rule, but are perfected pre-petition? For example, it seems pretty clear that if someone buys a car, and then within a month files BK, and the lender has not perfected at that point, they cannot try to do so "after the fact" as the trustees are considering that a violation of the stay.

But from that article I cannot tell for sure whether cases such as mine, whereas they violated the 20 day rule, but did get it filed pre-petition (the vehicle paperwork was finally filed at the beginning of Feb and I did not file CH7 until 4/20), are included in this?

[despritfreya]

Look at 11 USC 547(c)(3). This section provides that a Trustee cannot avoid, as a preference, the fixing of a lien such as the one you are dealing with so long at it is perfected within 30 days of you gaining possession of the vehicle. What I do not know is if this trumps the State 20 day requirement. It probably does so the question is whether or not your lender "perfected" the lien within 30 days of you driving the vehicle off the lot if such is within the 90 day preference period.

I suspect the real issue is whether or not your lender has a lien at all. I have had cases where the lender simply forgot to place a lien on the title. But. . . that was before Arizona law changed. I believe that lenders can now "perfect" their lien by simply holding the original title. I may be wrong on that because I still get Proof of Claims showing a copy of the title with the lien referenced and I know the lender has possession of the original title.

The only way for you to really get a handle on this is to ask your Trustee. And. . . by the way, there is nothing wrong with inquiring as to the status and telling the Trustee about your situation - that you cannot afford to pay for the insurance. It is really the Trustee's responsibility to insure the protection of assets if the Trustee is going to take control for the purpose of liquidating them.

Des.

[sh9730]

Thanks again Des! I dont think my lender made it within the 30 day window either! I had to call the dealer on a daily basis to get the thing registered as the temp tags were expiring (I think those are 45 days, right?)!

Wow, I hope my lender had some recourse with the dealer....otherwise they may get screwed! As I ve said in earlier posts, I wouldnt be too bummed if the DEALER was the one who gets it somehow in the end. Although, no question I should have NEVER bought TWO new cars at once when I did, the dealer really did some fancy finagling to file BOTH loan applications to different lenders at the same time so it wouldnt look like I WAS buying two cars. It should have never been approved, althoug again...MY FAULT in the end. But this transaction is what put me over the top expense wise....playing a big hand in the eventual BK filing.

Des, you can get out of this thread now if you want....you ve answered (as usual!) more than I could have hoped....but Im curious, in your experience, does this situation usually end up in a settlement with the "secured" lender? Then that amount is distributed to the other creditors? Or do they really just take the car, sell it, and the original lender just gets their piece of the unsecured pie?

Also, Im curious as to if when there IS an asset such as this to distribute funds from, whether that DISinclines other creditors from AP, since as long as they file a claim, they will get something at a minimal cost?