Hmmmm, that's an interesting situation, I'm going to follow this as I would like to hear the outcome.

I've never been in this situation but have been around people who were. If you do not return the title to the credit union they WILL file suit against you for the whole amount on top of filing charges for loan fraud as this was stated in the agreement between you and the bank. You may want to read over your credit union paperwork when you have a chance. While they would have a harder time trying to repo the car without a title, the fraud charges would of course be much more severe.

Believe me I'm not trying to screw over the credit union or commit any type of fraud. I've actually researched all over the internet for these type of situations and never came across anything or anybody's story that involved them getting fraud charges against them. The thing is the issue is just now coming up almost a year later and I'm getting ready to sign the paperwork for a chapter 13 in which the loan will be included in anyway. So when I contacted my BK attorney I was basically telling him the situation and asked him if this needed to be taken care of before the filing. That's when he said he wanted to see everything first before I did anything with it. I was told, not by my attorney, that even though the lien is not perfected the trustee may still put the value of my car in the secured portion of my BK and the remaining in the unsecured. I'm meeting with my BK attorney in a few days and believe I will be asking several questions, because I don't want any surprises.

It sounds more or less like Americredit screwed up by sending the title to you instead of your credit union. So not to say in any way that you did this on purpose, but this sort of situation is precisely why I/my company would never give a loan out without making sure that we get the title. And we definitely wouldn't have waited a year before saying anything about it -- we would have been hounding you and Americredit for the title after 30 days, and getting attorneys involved if we didn't have it by the 60th day.

Generally in a refinance deal (the CU paid off Americredit, right?), we would put a restrictive endorsement on our check. In cashing our check, Americredit would have unconditionally guaranteed that they would release the title directly to us, and not the customer. To that end, we would have recourse against Americredit if we were unable to perfect our lien and sustained any damages as a direct result of their failure to send us the title. Now whether your CU put a restrictive endorsement on their proceeds check, I don't know.

The fact is that you did execute a security agreement, which does create a security interest in favor of the credit union. That security interest, at present, just has not been perfected (by recording it with the secretary of state). Technically, and if you read the fine print on your contract, you did have an obligation to assist them in perfecting their lien (ie making sure they ultimately receive the title). The failure to do so is a breech of contract on your part. I wouldn't necessarily call it fraud, like the guest above says, because this really is a bona fide error notwithstanding. For them to say fraud, they would have to prove you acted in bad faith and purposefully withheld the title from them. Now, after giving you notice and you still fail/refuse to give them the title, then they might possibly be able to say that's bad faith on your part (but at the direction of your attorney, probably not).

Now your BK attorney might have the bright idea of trying to get this classified as "unsecured" since the lien was not perfected. To me, that's just adding time and frustration (and possibly added legal expenses to your balance). If he does that, the CU will have their attorneys go in to court and object to being treated as unsecured. With good cause, and being able to show the bona fide error that prevented them from perfecting their lien, a BK judge will most likely give them a secured status, and tell you to give them the title so they can perfect their lien.

Bottom line for you, I believe, is that 1) sooner or later you're going to have to give them the title, and 2) you'll have to pay them in full of a secured claim, whether your BK plan calls for you to be the dispersing agent or have the trustee make the payments for you.

while that may be true about perfecting the loan right before filing BK, I would have to think in your case that it would not be the same as transferring property, because you actually did the refi over a year ago. I can see if someone just did the refi and then declared bankruptcy.....but that isnt what happened here. Check this with your attorney.

True skydivr7673, I thought that as well. Since the car is listed as the collateral on the documents that I signed over a year ago, then I don't think that would be the case. The trustee may just want to know why the lien was just now perfected and it was honestly an error, an oversight actually on both the credit union and I.

Pink, listen to your attorney. While everyone here is giving your realistic info, since you are working with an attorney let him deal with it. Thats what you are paying him for. Let him deal with it and relax about it

Yes Pink, as JJ says take your attorney's advice moreover than ours. After all, my standpoint generally does come from a creditor's point of view.

I will say though, that I have dealt with BK attorney's that, quite frankly, don't know what they're doing. And I've had to send my attorney into the BK court to file objections as a result. The court usually allows my attorney fees to be added to the loan balance; and so the customer ends up paying for their BK attorney's mistakes.

Now this doesn't happen very often. Morseo it happens with "cookie-cutter" law firms that don't give a lot of personal attention to your case. If you have a reputable BK attorney, who will actually be reviewing your situation and double-checking the paperwork (and not just blindly signing off on something a paralegal did), then you should be fine.

Thank you everybody for your advice and input, I will try to stay at ease until my BK attorney looks at everything. But you all have made me think of several questions I will be asking him. :-) I will keep you all posted on the outcome.
Thanks again.

PinkLady,

You'll be fine. The thing to remember is the loan company will always send you the title up front to register the car but they expect the title back within 4-5 business days ;). It's just something they must do so you can register it correctly.