Can I sell car listed as collateral for a bank loan
Date: Mon, 10/22/2007 - 20:11
Just because you have the title does not mean that they did not
Just because you have the title does not mean that they did not put a lien against it. I would talk to the bank. I have been in that situation and got it back.
I agree with Pyb...and the contract does indeed stand even if th
I agree with Pyb...and the contract does indeed stand even if they didnt take the actual title.
You are correct that generally the bank would perfect their lien
You are correct that generally the bank would perfect their lien by registering it with the state. It is possible that the bank 'screwed up' and forgot to take your title from you. If that is true and that lien is not formally recognized by the secretary of state, you would probably be successful in selling the car (for the time being...).
HOWEVER, if your financing contract lists the vehicle as security and you signed a valid security agreement, then the bank does nonetheless hold a valid security interest in the vehicle. To sell the vehicle while knowing there is an encumbrance against it could be considered conversion of mortgaged property, which in some cases can be a criminal action. (Just because the bank possibly screwed up in the beginning, doesn't alter the fact that you pledged it as chattel mortgage).
Also, when you go to sell the car you usually need to execute a Bill of Sale with the new buyer. Just looking at a standard Bill of Sale, there is commonly some fine print as follows:
Quote:
Seller hereby represents and warrants that Seller is the absolute owner of said vehicle, the vehicle is owned by Seller free and clear of all liens, charges, claims and encumbrances and that the Seller has full right, power and authority to sell said motor vehicle and to make the Bill of Sale. |
In the end, if you were to default on your bank note, they still may be able to get the car back from your buyer, and then your buyer would have a cause of action against you for falsely conveying that the vehicle was 'free and clear', when in reality it wasn't.
In the very least, when the bank finds out the collateral no longer exists, they can declare a breach of contract and your whole balance becomes immediately due and payable.
I think this is a can of worms you don't want to get into until you've paid the bank off.
