Auto Title Loan, If I File Bankruptcy and Never Give the Car What Will Happen?

Written by James Hirby | Fact checked by The Law Dictionary staff |  

Like most loans designed to finance the purchase of new or used vehicles, auto title loans are secured loans. When you take out an auto title loan, your promise to repay your lender in a timely fashion is backed by their claim on your vehicle's title. In other words, they reserve the right to repossess your vehicle should your loan fall into arrears. While this arrangement mitigates the loan's risk to your lender and may reduce its effective interest rate by a few percentage points, it also leaves you vulnerable to losing your vehicle should you become unable to fulfill your obligation.

If you're in danger of filing for bankruptcy with an outstanding auto title loan on your financial record, you'll need to do one of two things. First, you may sell the car and use the proceeds to pay off your loan before your bankruptcy filing becomes official. This is the safest and most common course of action in this type of scenario. You may also file for bankruptcy before paying off your loan and wait for the presiding judge to award your vehicle to your lender. In either case, you'll lose your car.

If you choose to stop paying down your auto title loan and refuse to hand the vehicle over to your lender, it will eventually be repossessed. The repossession specialists that auto lenders pay to track down and seize vehicles are seasoned professionals. Even if you move clear across the country to escape your debts, they'll be able to find your car using a national database of motor-vehicle registration records. Vehicle repossession can be an unpleasant experience as it often occurs when you're using your car during daylight hours.

For instance, your "repo man" may stake out your place of employment until you arrive for the day and then take your car once you're seated at your desk. You'll have no inkling of what happened until you walk out into the parking lot on your lunch break or at the end of the day and discover your vehicle missing.

It's technically possible to "hide" your vehicle by moving it to another legal jurisdiction, canceling your current registration and leaving the vehicle unregistered in your new location. However, this is not advisable. By failing to register and insure a working vehicle, you'll be in violation of the law as soon as you establish your new residence.

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