Legal Question in Bankruptcy in California

Is an auto finance lien voided in bankruptcy?

Our car was totaled in an accident,

where we weren't at fault. The car

was included in our bankruptcy. The

insurance company states that

chapter 7 only discharges the

debtor's obligation to pay for a

debt, but does not extinguish liens.

Our insurance company says they

are obligated to satisfy the lien. We

thought that chapter 7 bankruptcy

meant the debt no longer existed

and the insurance settlement

should be paid entirely to us. Is this

correct? Thank you for your

response.


Asked on 1/27/09, 4:59 am

1 Answer from Attorneys
JOHN GUERRINI THE GUERRINI LAW FIRM - COLLECTION LAWYERS

Re: Is an auto finance lien voided in bankruptcy?

If only it worked that way . . .

The insurance company is correct. The debt, while no longer enforceable (presuming you obtained a discharge in bankruptcy), has nothing to do with the lien. The lender (the company that financed the car for you) has a security interest in the car. This is why your pink slip shows the lender as lienholder. The lender is also loss payee on the insurance policy. The lender is the beneficiary under the policy, as long as it holds the security interest.

You are not entitled to the money. The money goes to the lender.

Read more
Answered on 1/27/09, 12:06 pm


Related Questions & Answers

More Bankruptcy Law questions and answers in California