The Expert Podcast

Hello, this is Dave Pelligrinelli at Car Titles. In this video, we're going to take a look at charge-offs, write-offs, repossessions, lien titles, and other related subjects to vehicles that have a lien or loan that's holding back or encumbering the title. One of the most common questions we get is about a vehicle that had a loan at one point. The loan became non-performing or delinquent, and now the person wants to get a title. In many cases, the owner of the vehicle, or maybe a purchaser, has been in contact with the lien holder, and they don't want the car back.

This is very common, and you might be wondering why they don’t want to come get the car, but there's a reason for it, and we’ll talk about that as well as methods for getting a title. First of all, what is a charge-off? A charge-off is a legal term that lenders use to describe a loan that is no longer considered a performing loan. What does that mean? When a bank or financial institution loans a person money, that loan is considered an asset on their books.

Let’s say, for example, you have $20,000 in your bank account. If somebody asks what your assets are, you could say, "I have $20,000." Banks can count the money they have in their bank, and they can also count loans they’ve lent out to people. So, if a bank lends a person $20,000, they can say, "I have an asset of $20,000," because technically, that’s something of value to them. However, if that loan becomes non-performing, they can no longer call it an asset, and there's a reason why that's important.

Banks and financial institutions, when they declare and state the value of their company for things like insurance, stock prices, or financial reporting, have to add up all their assets and state, "Here's what our bank is worth." If they have a loan that’s non-performing, they can no longer count it in the addition, so they have to make it a charge-off.

What is a charge-off? Here’s a great article from a credit union, but it applies to banks as well, and it gives guidance on what to call a charge-off. It explains that when the board deems the loan a loss, they must charge off the loan in compliance with disclosure requirements under rules and regulations. The policy should address loans representing a high probability of loss. Examples include a non-performing loan more than six months delinquent, loans in the hands of an attorney or collection agency, and a skip where the credit union has had no contact for 90 days.

Many times, we see banks and financial institutions use between six and eight months. If they haven’t gotten a payment, they have to make it a charge-off and report it to the regulatory agencies. What happens when a loan is charged off? According to Investopedia, when a car loan is charged off, it means the lender no longer believes you will repay the loan, and they may sell your account to collection agencies or debt buyers. Technically, the borrower is still legally obligated to pay the loan, and it damages your credit. But the question is, what happens to the collateral?

If the loan is for an automobile, and they sell the loan to a credit union, collection agency, or debt buyer, who owns the car title? It’s a gray area. There have been court cases where, when a bank declares a charge-off and uses it as a write-off on their taxes, they can no longer claim it as an asset. Can they still claim the collateral? Sometimes they say yes, sometimes they say no.

What happens is many borrowers, or maybe even a buyer who purchased a vehicle on Craigslist, will submit a request to the lien holder for a lien release or a letter of non-interest. Many times, the corporate counsel, a bank representative, or an administrative person sees it and says, "Hey, this is a charge-off. We cannot continue to claim the title." That’s not always the case; sometimes they say, "No, it’s our title, and we’re going to hold it until we get paid."

You’ll be back in your video in just a few seconds. In the meantime, remember that ActualHuman.com offers live one-on-one private video consultations with experts in this exact subject. We want to listen to your story, answer your questions, and give you expert advice about your options based on your particular situation. Now back to your video.

It’s up to the individual lien holder and their interpretation of the law. Remember, we’re not attorneys and aren’t giving legal advice. All we’re saying is that if you have a vehicle that needs a title with a lien, the only possible way to get that lien released is to submit a request to the lien holder. It’s important how you do this. Don’t call, email, or send a message electronically. It must be in writing. Here’s how we do it: we prepare a package of documents, and it comes in a folder. We send this package to the lien holder and the vehicle owner.

The reason we do this is that if you call the lien holder and ask for a lien release, someone at that bank has to find documents, fill them out, sign, and mail them. They don’t want to do that work. But if you send a package, it may show up on a clerk's desk, they might look up the VIN number, see it’s a charge-off, and just sign and mail it back to you. There’s no guarantee, but if you don’t do this, you will never get a title because the DMV cannot give you a title if there’s a lien.

If the lien holder doesn’t respond, you can file a petition with the court to override the lien and declare you the vehicle owner by court order. You would say, "Look, I tried to contact the lien holder; here’s the paperwork. They never replied, so I’m asking the court to override it and sign the lien release." Can they do it? Yes. Can they say no? Sure. You won’t know until you try.

This process for removing a lien applies to vehicles and even real estate liens, mortgages, second mortgages, and judgments. The most important thing is to make the attempt.

One thing to keep in mind is that collection efforts after a charge-off are still possible. For example, credit cards follow similar logic. Even if you get a lien release, the lender can still try to collect the loan. However, according to the Consumer Finance Protection Bureau, only about 8% of post-charge-off accounts are being collected internally, down from 22%. Fewer lenders are trying to collect internally now, though they may send it to a collection agency.

If you have a vehicle with a lien recorded on the title, the most important first step is to officially request a lien release. Nothing can happen until that lien release is submitted to the DMV, signed by the lien holder, a judge, or the court.

Never contact a lien holder by phone, email, or text. Do it in writing. It’s easier for them to sign if they have the papers in front of them. Loan charge-offs, repossessions, write-offs, and title liens are all related. The only thing you need to worry about is how to get that lien off your title to sell, drive, or transfer your car, or get paid by your insurance company.

If you have more questions about lien releases and titles, click the link below. We also have a new website, CarShortSale.com, for vehicles that you owe more than they're worth. There are ways to resolve that.

Thank you for watching another video at ActualHuman.com and Describe.TV. Remember, if you have questions or comments, leave them below. You also have access to live consultations with licensed experts in fields like investigations, insurance, civil court mediation, real estate records, business development, and more. Thanks for watching.