Car Debt that was erased in BK got totalled. Now what?

[BrokeinMD]

Hi All - Long time since I've been here, but my situation when from bad to worse. Lost my job the year of my discharge and just found one this past week, making a 3rd of what I owe. Not crying the blues about that, but my car just got totalled. The car was part of the Chapter 7. The bank wanted re-affirmation, I went to the hearing in MD, my lawyer cried broke, and the debt was discharged, but I continued to make payments on it. I only had 22 more payments to go before my other half wrapped it around a telephone pole (The pole won, but he walked away, Thank Goodness?)

So my question is, when my insurance company settles with me, will what they pay for the car be totally mine since the car debt was forgiven in the Chapter 7? Any help would be appreciated.

Thanks guys, missed you all. Hope that there have been many successful BK's in my absence!

[bcohen]

No, you will likely receive little or nothing from the insurance settlement, unless the car is worth a lot MORE than what you owe. The reason is because with a lienholder on the title, the insurance check will be in both names, and you won't be able to cash/deposit it yourself.

[BrokeinMD]

But how can they collect on a discharged debt? Appreciate all's advice while I wait for my attorney to answer this, too.

[BrokeinMD]

NADA value, btw, says 9 - 15k, and I only owe 3,800 per the payment schedule. Thanks.

[IBroke]

But how can they collect on a discharged debt? Appreciate all's advice while I wait for my attorney to answer this, too.

My best guess is because a car loan is a secured loan and when they receive the insurance check, they are not technically "collecting" from you like calling you or sending you a payment reminder..

[catleg]

If you have the lienholder listed as a loss payee on your insurance, they will get a check for the amount owed, and you'll get the difference.
If you don't have the lienholder listed on your insurance, you may be in luck as the insurance will just pay you I think.
But just like a house, when the BK extinguishes your personal responsibility for the debt, the lien holder still has an "in rem" interest in the collateral which doesn't go away until you pay off the loan or they take back the car.
So if the insurance doesn't know about the lien, is where it gets interesting.
**ps: however, the insurance is going to want a title to the car to pay off a totalled vehicle, which only the lender can provide.

[keepsmiling]

Yep, we just went thru this with our car.
Which we had just paid off.
Had to send title before getting check.

[BrokeinMD]

It is going to be interesting because they are not listed with my insurer, but they are listed as a secured party on my title, which I have. I will have to surrender the title to State Farm at my agent's office, once I settle with them on the Total Loss figure.

[malf1204]

Your insurance policy requires you to notify the insurance company of any and all lien holders. If you were to get a check from them and not tell them about the lien holder and the lien holder sued them you could be accused of committing insurance fraud so be careful.

[tobee43]

yes, the fraud issue is at play here and there are all types of fraud with different levels of statue of limitations. in this case the insurance fraud may be considered while also mail fraud may also come into play.

you just want to be very careful that you do this the "correct" way, so that no one can come after you asserting that you may have attempted to deceive them in anyway. i would also plead ignorance, but you just don't want to get yourself trap into a heavy legal situation, especially with insurance companies who have bottomless resources. oh! and each state varies in with the statue of limitation on fraud, actually from the day the fraud was committed.

[BrokeinMD]

My question is not an attempt to commit fraud. It's a question of what the lender is due. They're obviously due the collateral, which is the car, and the insurance company insured me driving the car. The question is, do they get the monetary value of the car, when the debt was discharged, or do they get the collateral? It's going to go whatever way it does when they settle with me for the loss. I'm just trying to see if anyone here has been through this so I can quit biting my nails to the quick!

[BrokeinMD]

And, yes, the insurance company is aware of the lien holder, and vice versa. I had to have full coverage to finance the vehicle.

[malf1204]

I think you are missing the point. The insurance company is not going to issue you a check if they know there is a lien holder. They can and do get sued by the lien holders if they do not ensure that the lien holder is on the check. If they are aware of the lien holder and they do issue a check in your name only then cash it and don't look back. It is there problem. You only have problems if you receive all of the payout, the lien holder receives none and they sue the insurance company and the insurance company claims you defrauded them. The original lien holder is entitled to the property as is. Do not confuse insurance contract law with bankruptcy law two completely different things.

[BrokeinMD]

I'm not missing the point, I'm asking a question, Mal. I want to know what exactly they are owed when the debt in the BK was discharged. I have continued to make payments. I called them Friday to find out the payoff figure, with 14 payments to go, and they quoted me double the amount as if I were to continue to make payments, claiming it was "interest". Who's defrauding who? If you don't have the answer, it's okay. I'm waiting for my attorney to answer, as the bank is already trying to defraud me on a debt, while discharged and I didn't reaffirm, I am paying anyway.

[catleg]

I would call the lender and ask for a full statement of the account. This should show all payments and charges.
It's always worth checking whether all your payments were credited.