Purchased car, then selling filed bankruptcy

[383]

I live in Idaho, purchased a car from the seller in Feb, 2007, my wife didn't bother to register and do the title work until April, the seller filed bankruptcy in March. I just got a letter from the Trustee saying that he needs to come pickup the car! Did I just get the hosing of a life time?

[yoyoma51]

Ooooooooo. I think you may need a lawyer if it was for a substantial amount of $$ and worth going after.

I would think you MAY have a defense if you can PROVE (with a bill of sale or something) that you purchased it before he filed. Be prepared to show PROOF of payment (canceled check, money order, etc). Cash may be a problem.

Also, I hope you are not a close acquaintance or relative of the person filing BK. If you are, the trustee may suspect it was a fraudulent transfer to hide the asset.

Good luck! Keep us posted in this interesting post!

[383]

I have a copy of the cashiers check dated Feb 9th. I am in the process of getting the original title that the seller signed and dated along with the bill of sale. No I am not related and the price I gave for the vehicle is fair. The screw up was us not getting into DMV before the seller filed. I contacted my attorney and he thinks there is a chance we can beat this once we get all the info together.

[HHM]

Something is not adding up to me....

Trustee's don't normally do car title investigation as part of their routine practice, so I am curious why the trustee would have simply jumped to the conclusion that he is entitled to "come pick-up" the car. Granted, the seller would have listed the sale in his statement of financial affairs, but that only alerts the trustee that a sale was recently made. Most trustees don't even give that area of the paperwork a second look so long as the debtor has adequate documentation of the sale.

In any event, you are in a tough bind as car title issues (as is real estate) are almost exclusively paperwork driven, so if you did not get a new title issued before this person filed BK, you are most likely out of luck. Granted, you have a good "equitable" argument, but when title issues are driven by statute and paperwork, the judges hands are usually tied.

[no_it_all]

I live in Idaho, purchased a car from the seller in Feb, 2007, my wife didn't bother to register and do the title work until April

What do you mean by "do the title work"? What <exactly> does the buyer have to do with the title other than getting one from the seller when they fork over the cash? Sounds fishy..

[CindyLou]

What do you mean by "do the title work"? What <exactly> does the buyer have to do with the title other than getting one from the seller when they fork over the cash? Sounds fishy..

It is the buyers full responsibility to register the car and do the title work...usually within 10 days of the purchase. The only time this is done by the buyer is if the car is purchased from a dealership.

When a private party sale is done the only thing the seller has to do is fill out a release of liability. sign the title and bill of sale, and they are done. The buyer then has to take the signed title and bill of sale to the DMV, register the car, apply for a transfer of title, and pay the fees and taxes.

I have heard of trustees doing title searches on cases where there is reason to believe the person may be hiding property.

[383]

It is the buyers full responsibility to register the car and do the title work...usually within 10 days of the purchase. The only time this is done by the buyer is if the car is purchased from a dealership.

When a private party sale is done the only thing the seller has to do is fill out a release of liability. sign the title and bill of sale, and they are done. The buyer then has to take the signed title and bill of sale to the DMV, register the car, apply for a transfer of title, and pay the fees and taxes.

I have heard of trustees doing title searches on cases where there is reason to believe the person may be hiding property.

Thats how I understand it. In this case I paid FMV and I didn't know this guy at all. My screw up is being slow to get the registration done. So. . .what are your bets? I have proof that I purchased it before he filed. Think I will win or lose?

[no_it_all]

The buyer then has to take the signed title and bill of sale to the DMV, register the car, apply for a transfer of title, and pay the fees and taxes.

I'm confused..other than <taking the signed title to DMV> what <work> does the buyer do to the title? Please explain the <title work> that the original poster <did not do>....

[no_it_all]

It is the buyers full responsibility to register the car and do the title work...usually within 10 days of the purchase. The only time this is done by the buyer is if the car is purchased from a dealership.

Huh? Someone please read the above quote and see if it makes any sense, I can't figure it out....

[no_it_all]

Think I will win or lose?

I don't think you will win, I know you will.......chill

[no_it_all]

When a private party sale is done the only thing the seller has to do is fill out a release of liability. sign the title and bill of sale, and they are done.

Really? How can a seller in a private party sale sign a title that the lien holder has and won't release until it is paid in full??? Please explain the procedure as you <understand> it..

[bigreddog]

If he signed the back of the title over to you, the buyer, it's a binding contract as of the date signed on the back of the title. I did title work for 4 years. But this is NH. If you gave him $$$ and he handed over a signed title (that is valid and free of liens) than NO ONE can just come take it away. UNLESS it was a fraudulent transfer on his part and the trustee thinks you were an insider or relative. I don't see how this is at all possible???

[HHM]

If he signed the back of the title over to you, the buyer, it's a binding contract as of the date signed on the back of the title. I did title work for 4 years. But this is NH. If you gave him $$$ and he handed over a signed title (that is valid and free of liens) than NO ONE can just come take it away. UNLESS it was a fraudulent transfer on his part and the trustee thinks you were an insider or relative. I don't see how this is at all possible???

It goes back to how the state views title issues. The purpose of having recorded titles (whether for cars, homes, UCC, etc), is to put the public on notice of the ownership/security interest. If the State takes a strict view of this purpose, creditors, in some circumstances, can void the sale if the Title was not properly recorded.

Basically, your defense is that you are buyer in due course, and I think you will be ok, it sounds like you have good documentation, but without knowing more about the specifities of your state's law, your chances are 50/50

The issue the trustee is raising is whether the seller still had any ownership interest in the car. After all, ALL assets in which the debtor has real/equitable legal title/interest become part of the BK estate. If your state is such that a car sale is not fully consumated until the Title is RECORDED with the DMV, you are going to be SOL. The real sticky issue, if that is how the court rules, is what happens to the money you paid for the car...short of doing research, I have no insight on that issue except pure speculation.

[383]

Well, here is the update. My attorney spoke with the trustee. The trustee thinks they can still take the vehicle even though payment was made a month before the seller filed. My attorney says that its an interpretation of equitable estate. I guess Idaho law breaks it up into two categories. . .equitable interest & legal interest. In order for the vehicle to be included in the bankruptcy estate it should have both equitable & legal interest. My attorney argues that the seller doesn't have equitable interest because he sold it to me the day he accepted the $ and signed over the title. The trustee reads the law differently & thinks that they can still come after the vehicle. So, my attorney is looking though some cases to try to find a case where this has happened before. The wait continues. Basically. .. I am getting raped by the consciousless legal system. . .and I have to purchase the vasiline. . .

[HHM]

Well, here is the update. My attorney spoke with the trustee. The trustee thinks they can still take the vehicle even though payment was made a month before the seller filed. My attorney says that its an interpretation of equitable estate. I guess Idaho law breaks it up into two categories. . .equitable interest & legal interest. In order for the vehicle to be included in the bankruptcy estate it should have both equitable & legal interest. My attorney argues that the seller doesn't have equitable interest because he sold it to me the day he accepted the $ and signed over the title. The trustee reads the law differently & thinks that they can still come after the vehicle. So, my attorney is looking though some cases to try to find a case where this has happened before. The wait continues. Basically. .. I am getting raped by the consciousless legal system. . .and I have to purchase the vasiline. . .

That is what I was afraid of...but realize, judges are people too, they typically do not like to rule against innocent parties...so at least you have that going for you.