We saw it with homes, especially condos, now we see refusal of lenders to take possession of cars and boats following bankruptcy.

Please consider My lender refuses to repossess my car

Dear Bankruptcy Adviser,

I was forced to file Chapter 7 bankruptcy. I agreed to surrender my vehicle. After my Chapter 7 was discharged, I naturally expected my car to be picked up by the lender. It has now been three months. Is there a required amount of time in which they have to pick it up? I have made many calls about this to my lender. Not one call has been returned. Isn’t there something in the law that states they have a time limit to pick up the car, or else release the title to me?– Jim

The “Bankruptcy Adviser” responded that he is seeing this action more frequently because resale value is “so low that the lender doesn’t want to waste resources to repossess, refurbish and resell.”

The BA presented three options.

  1. “Keep the vehicle and use it.”
  2. “Park the vehicle in a secure, public location and send a copy of the keys via registered mail to the creditor”
  3. “Call the lender every 48 hours until you talk someone into picking up the vehicle.”

In regards to option number 2, the BA failed to mention there is a risk the vehicle is towed and storage charges assessed. That risk is so high and the consequences so great that #2 is not a good option at all.

To be fair, the BA does say “The risk for you here is that you will need to confirm that the car eventually was picked up by the proper entity”, but that warning is not emphatic enough.

My personal suggestion is keep the vehicle and use it, but please make sure it has legally required insurance.

If someone cannot afford the insurance or this was a second, now unneeded car, then option number 3 could be appealing.

I think that upon proper notification, a lender should lose rights to the property if the lender refuses possession.

In the case of cars and boats that would work. However, in the case of condos where homeowner fees, maintenance, insurance, and back taxes may easily total far more than the home is worth, such a law would still not entice banks to take possession.

By the way, are such loans written off as worthless on the balance sheets of banks? I suspect not.

Mike “Mish” Shedlock

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