Payments for buying car from relative prior to filing.

[wellnowwhat]

Hello, everyone.

My wife and I are planning to buy a car from her aunt and uncle prior to filing Chapter 7. We are now filing jointly. I had originally planned on filing individually but we got hit with large medical bills in her name so we've decided a joint filing makes more sense.

My attorney and his paralegal have said the vehicle must be "perfected" before we file, as we are planning on making payments to her aunt and uncle for the vehicle. Essentially they are going to hold the title as a secured creditor while we make payments to them. We're going to have them create a bill of sale which we are then going to file with the DMV, showing them as security interest holders on the title and registration form. We're hoping this will help avoid any issues with insider payments.

I'm a little nervous about the process as I don't want her aunt and uncle to be negatively impacted if something goes wrong. Has anyone else dealt with a situation like this? Were there any hiccups or issues you ran into?

Note: We're not trying to be dishonest in any way but we currently only have one car and an 8-month-old baby, so a second vehicle is a necessity and financing one through a major dealership isn't an option at this point.

[AngelinaCat]

As long as you are paying Fair Market Value (FMV) for the vehicle, and you can show documentation proving that, you should have no problem. It reads like you already have that matter well in hand.

Good luck to you!

[justbroke]

Let me suggest that you get some more help with what is a "secured" interest with respect to motor vehicles in your State. In Florida, the secured party could hold on to a promissory note (installment agreement) and should have the title updated to reflect them as a lienholder (that's the most important). It is probably in the lienholder's best interest to actually physically hold on to the title until the debt is satisfied.

"Perfection" of the lien is important. Please seek help with this. There are many conditions about perfection when it comes to bankruptcy.

I don't know about Oregon, but in Florida, the Department of Highway Safety and Motor Vehicles (DMSHV) will typically help a notice "lien" a vehicle properly. To place a lien on a vehicle, you will typically pay a fee for a new paper title to be generated which has you listed as lienholder.

[keepmine]

Also, the UCC requires the lien to be perfected within a certain time period of the sale. I think it's 20 days.
I'd agree with Justbroke-let a lawyer handle this one from start to finish.

[tobee43]

you can draw up the promissory note yourself and save yourself a few dollars. one really does not to incur unnecessary legal fees for such a simple and clear document. no need to make this more complicated than need be, with all due respect to my fellow forum members . as suggested by jb, the title should be held in your aunts name until the loan is paid in full.

here is a sample and they are all "legal" : https://www.google.com/search?q=exam...=1920&bih=1054

[keepmine]

Perfecting a lien is more involved than drawing up a note in the bk context.
We've had a few members over the years who have had trustee issues with liens that were not properly perfected.

http://www.bkforum.com/search.php?searchid=2228999

[tobee43]

yes, keepmine, i am aware of this. however, usually dealing with family loans the courts have been accepting of less complex formats. between family usually the loans are less "formal" and while just as any creditor allowed to be listed. the problem i see is a conflict period on situation such as this for paying one creditor over another, we all know that not all creditors are treated equally. why is one paying their family and not their credit card bill??

personally, if it were me, i would wait until after the bk period. this type of situation can cause problems no matter which way you handle it and to me, the easier it looks the easier it is handled by the trustee. i just see the entire situation as a possible priority claim that can be challenged by the court.