Legal Question in Credit and Debt Law in Virginia

Withholding Title

I have a car loan and a credit card with the same credit union. For a while I got behind on my payments to both accounts. I have worked really hard to catch up on the payments, and have paid down the VISA account $1,400 in the past 3 months. The balance on the VISA is now $7800. I only have 1 payment left on the vehicle. The credit union is telling me that they are going to hold the title to the vehicle until the VISA is paid off because it got so much behind. Can they do this? I am paying off the loan that was secured by the vehicle, shouldn't they have to release the title? There suggestion to me is to combine the last payment for the vehicle and the balance on the VISA into a 24 month payment plan. If I agree to this, then that does transfer the debt over to the security of the vehicle. But if I don't agree, can they legally hold the title to my truck?


Asked on 4/08/04, 11:18 am

1 Answer from Attorneys
Jonathon Moseley Jonathon A. Moseley

Re: Withholding Title

First, you need to read the details of both contracts (the car loan and the Visa loan). It is unlikely, but not impossible, that such a scheme is mentioned in those contracts. If you did not agree to any such thing (that is, it was not in the contracts you signed) then of course they cannot do it. One concern is that you breached the contract for the car loan by falling behind on payments. But if they accepted a payment after that time, you probably "cured" any problem there by them allowing you to treat the loan as still in force by continuing to accept monthly payments for you to get caught up.

Second, if it IS in the contracts, the question is whether the contract is enforceable. There is a famous case from a furniture store in D.C. (I'd have to go look it up) where such a plan was held unenforceable because it was "unconscionable." That was not a Virginia case, and it is a very fuzzy concept, in the eyes of the beholder. But it is possible that a Virginia court would throw out that part of the contract, if it came to legal blows.

Of course, don't forget the fact that you are paying heavy interest on the credit card. So what you can do legally is not the same thing as what you SHOULD do financially to reduce your interest payments.

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Answered on 4/08/04, 11:46 am


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