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Fritz
Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience:  Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
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I filed a chapter 7 bankruptcy in Arizona.

Customer Question

I filed a chapter 7 bankruptcy in Arizona. It was discharged in August 2011. I had a financed vehicle that I surrendered. It's never been picked up. It's now been 18 months since a payment was made and 10 months since my discharge.  The note was discharged in my bankruptcy. Today in the mail, I received the title from the State of Arizona with no lien-holder listed on the title. Two questions: Is there case law to establish a statute of limitations for the lien-holder to protect their interest in the vehicle by taking it? What risk of future liability do I take in selling the vehicle? Thank-You
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  dkennedy replied 2 years ago.
Hello,

They cannot take it now because they are not on the title. They surrendered any rights they had by giving up the lien. You have nothing to worry about now. Even if they try to take it they have no legal right left. It's all in the title. Keep a copy of your title with you in the glove box.
Customer: replied 2 years ago.
If the lien release off the title was in error, does that eliminate their interest in their collateral? Specifically, is there any case law supporting the argument that they in fact lost their collateral due to their clerical error?
Expert:  dkennedy replied 2 years ago.
I don't know of any case law and am not in a position to do legal research on this issue. if you would like, I will opt out and see if another profession is willing to do that for you.
Customer: replied 2 years ago.
Yes, the question was very specific, and while I tend to agree with your analysis, I was looking for an answer to 2 specific questions. Perhaps this is not the best place to find a good answer with any legal weight behind it. I appreciate the effort.
Expert:  Fritz replied 2 years ago.

Hi, let me see if I can help you with this. To start, here's an interesting article about the very situation you seem to be involved with:

http://www.bankruptcylawnetwork.com/what-happens-when-a-lender-refuses-to-repossess-a-vehicle-surrendered-in-a-bankruptcy/

Please allow me some time to see if I can find any relevant caselaw, and I'll get back to you this afternoon. Thanks.

Expert:  Fritz replied 2 years ago.

1) Is there case law to establish a statute of limitations for the lien-holder to protect their interest in the vehicle by taking it?

I did not find any case law directly addressing this issue. However, most courts examining whether a creditor could be compelled to pick up the surrendered property have held to the effect that the Bankruptcy Code does not force a creditor to assume ownership or take possession of the collateral.

See, e.g. IN RE ARSENAULT, 456 BR 627 - Bankr. Court, SD Georgia 2011

http://scholar.google.com/scholar_case?case=12627519972988061045&hl=en&as_sdt=40005&sciodt=2,10

2) What risk of future liability do I take in selling the vehicle?

The case most on point as to this issue is In re Pratt, a 1st District Court of Appeals decision from 2006. Note that this case is not binding on an Arizona court, but it's the only case I could find that addresses a similar set of underlying facts. In re Pratt suggests that you might be able to reopen your case and file an adversary proceeding alleging a violation of the chapter 7 discharge injunction prescribed by Bankruptcy Code § 524(a)(2).

See In re Pratt, 462 F. 3dXXXXXof Appeals, 1st Circuit 2006

http://scholar.google.com/scholar_case?case=4255293682735835806&hl=en&as_sdt=2,10

It's likely that you do NOT have clear title to the car, so selling it without first obtaining clear title from the financing company in some way could subject you to a potential lawsuit, either from the financing company or the eventual purchaser of the car (to whom you wouldn't be transferring clear title). In theory, your potential liability would be limited to the present value of the car, but there might be some complicating factors under state law that would allow your creditors to recover more (i.e. knowingly selling a car without valid title could be considered fraud and/or conversion, subjecting you to additional civil penalties).

Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
Fritz and 4 other Bankruptcy Law Specialists are ready to help you
Expert:  Fritz replied 2 years ago.

If the lien release off the title was in error, does that eliminate their interest in their collateral? Specifically, is there any case law supporting the argument that they in fact lost their collateral due to their clerical error?

My gut instinct on this is that unless you actually have the Certificate of Title and/or the Lien Release to the car, the finance company would likely still try to claim they have a valid lien and blame any filing error on the DMV.

Customer: replied 2 years ago.
Hi Fritz,
I do actually have the title. It is clean, there is no lienholder listed on the title.

I appreciate your answers.

Kevin
Expert:  Fritz replied 2 years ago.
Thank you, and good luck!

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Fritz
Fritz
Bankruptcy Lawyer
302 Satisfied Customers
Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases