Legal Question in Credit and Debt Law in Michigan

They made a mistake by discharging their security interest on the van - the lien - before the debt was paid in full. That's why they are now asking for a new title. However, all they would have to do is prove that they still have a legal interest in the vehicle and file a lien. Generally creditors place themselves on the title as a secured party so then you can't dispose of the vehicle without them getting paid, and so they are notified of your auto insurance, cancelation of the insurance, etc.

In this case, since they made a mistake, they need to correct it on their own dime. Of course they are attempting to make it your problem and causing you more hassle. Additionally, they are irritating you by not working something out amicably to just call it a day - instead they are continuing with their mistakes, charging you late fees, etc., so why would you cooperate with a creditor like that? They could take legal action to have the lien put back on the vehicle, along with collection of the monies that are allegedly owed to them, however, they would have to prove the validity and legality of any debt, and explain to a Judge how this HUGE mistake occurred. The fact that they aren't offering a simple solution to you is ridiculous.

You are correct in keeping every single document regarding this matter, along with your account information from your online account. Who knows if they made a mistake in the past and overcharged you.

Since they are no longer on the title as a secured party, and you have documentation from them stating the lien was paid in full and that you owe them nothing, they cannot seek to repossess the vehicle through normal methods. They'd have to take other legal action first to "revive" the debt. Technically it sounds as though you are indebted to them, but again, they are making this confusing and difficult for you, all because of their mistake. They should have just advised you of the mistake and offered you various payment plans to pay off the remaining balance - at a discount.

If it gets to the point where they are harassing you via telephone, send them a letter demanding they cease all methods of communication, other than via mail. If they do file a lawsuit against you, immediately contact me for legal advice and representation. In the meantime, wait until they get this sorted out - sounds like they still don't have it right. And, like I said, while they likely do have a valid debt against you, they will have to prove it and file a collections action against you to recoup any monies. If they actually take it that far, you should retain a lawyer to resolve it for a lesser amount, and properly of course. Just wait and see what happens because if you started to make payments, who knows if it would be the proper amount, whether it would be credited to your account accordingly, or how long it would go on. This is a rare situation, and mistakes do happen, but your creditor shouldn't make it more confusing and burdensome on you.

It is possible they will not actually file a lawsuit if the amount is low enough - you never know. Again, just wait, keep documenting like you have been, and contact a lawyer if a lawsuit is filed against you (do not ignore the lawsuit - that's the worst thing you could do!).

This situation is rather humorous - to us - not to the creditor.....

Good luck.