- Who Is the Chapter 7 Bankruptcy Trustee?
- The Chapter 7 Trustee and Asset Exemption
- Why Does the Chapter 7 Trustee Need My Vehicle Title?
- What If My Car Lender Retained My Vehicle Title? Do I Have to Provide It?
- How Do I Get a Copy of a Michigan Vehicle Title for a Chapter 7 Trustee?
- Vehicle Titles and Chapter 7 Bankruptcy Trustees: The Bottom Line
A vehicle title is just one of many documents that you will need to provide to your Trustee in a Chapter 7 bankruptcy case. It may be, however, that you have lost yours. Or purchased your vehicle outside of Michigan. Or aren’t sure if you ever had a copy to begin with.
This Article discusses the requirement to turn over a vehicle title to a Michigan Chapter 7 Bankruptcy Trustee, as well as the practical considerations of where and how to get one if you do not have it folded into a shoebox in your closet.
First, an underlying question: Who the heck is the Chapter 7 Trustee?
Who Is the Chapter 7 Bankruptcy Trustee?
The Chapter 7 Bankruptcy Trustee is a private-practice individual chartered by the US Trustee’s Office of the US Department of Justice to “administer” the assets of your Chapter 7 bankruptcy estate.
The Bankruptcy Estate is the legal pool of assets created automatically when you file a Chapter 7 bankruptcy petition. It contains all of the property that you own at the time that you file, any right to property (including payment) that you have at the time that you file—and possibly property that you have transferred or sold within certain time periods before filing the bankruptcy case.
The Chapter 7 Trustee “administers” these assets by seizing them, selling them, and then distributing the resulting cash proceeds to your creditors.
The Chapter 7 Trustee and Asset Exemption
Of course, asset liquidation only happens if you cannot exempt some portion of your property with the available bankruptcy exemptions. These “exemptions,” or “protections,” are provided by the US Bankruptcy Code, which is the Federal statute underlying the bankruptcy process in the United States. There are a variety of such exemptions for different types of property.
Pertinently, the current (as of this writing) exemption for an automobile is $4,450. Thus, if your vehicle is worth only $4,000 in Blue Book value, it will be entirely protected in Chapter 7 Bankruptcy. However, if it is worth $4,500, that overhanging $50.00 in value will be exposed to the Chapter 7 Trustee. (Discuss with your bankruptcy attorney if he or she believes that a Chapter 7 Trustee will be interested in $50 or not.)
What if your vehicle has a lien on it?
A vehicle worth $10,000 with a lien balance of $6,000, has equity of $4,000—which can be fully exempted. With vehicles (and homes), it is the equity you’re worried about. This is because the Chapter 7 Trustee, if liquidating the vehicle (or home) would have to first use the sale proceeds to pay off the lienholder.
Most people who file for Chapter 7 bankruptcy in Metro Detroit do not lose any property to the liquidation power of the Chapter 7 Trustee because the exemptions fully cover the value of everything that most people own.
Where this is not the case, the Chapter 7 Trustee is paid for his or her trouble with a percentage of the funds generated from such asset seizures and sales.
They are motivated people, in other words.
Why Does the Chapter 7 Trustee Need My Vehicle Title?
So, what does any of that have to do with your vehicle title?
The Chapter 7 Trustee is obligated to perform his or her duties with due diligence. This means that the Trustee is obligated to disbelieve everything you write in your bankruptcy petition and schedules. If you list a vehicle, whether a car, truck, boat, or helicopter, the Chapter 7 Trustee is required to ensure that it is what you say it is—and that it is worth what you say it’s worth.
This means that the Trustee must ensure that the auto loan lien that you claim offsets your vehicle’s value by $5,000 actually exists. Does your car have $4,000 in equity—or $9,000?
To the Trustee, this will make a material difference. That is, it will be the difference in whether he or she is paid or not.
Some Trustees in the Detroit Bankruptcy Court will also require a recent payoff statement or a proposed Reaffirmation Agreement to verify the amount that you claim you owe on the vehicle is matches what the creditors says you owe.
The Chapter 7 Trustee does not, however, only check vehicle titles for lien balances. If you own your vehicle free and clear, with no encumbrance on the title at all, the Chapter 7 Trustee still wants to take a look. Do you really drive a 1998 Toyota Corolla? Or is it actually a 2023 McClaren 750S hand-autographed by the guys from Top Gear?
Inquiring minds want to know.
What If My Car Lender Retained My Vehicle Title? Do I Have to Provide It?
In Michigan, vehicle lenders do not retain the title until you pay off your car loan. That is, Michigan is not a “title-holding” state.
If you bought your car (or boat or truck or road-worthy tractor, etc.) in Michigan and can’t find your title, you’ve simply lost it. You will need to get another copy to provide to the Chapter 7 Trustee. (See below for more on how to do this.)
On the other hand, if you purchased your vehicle in, say, Virginia, it may very well be the case that your lender has retained the title, despite the fact that you’ve now moved to Metro Detroit, Michigan.
Virginia, among others, is indeed a title-holding state.
One more check may be in order, at the risk of being obvious: Did you actually lease your vehicle rather than purchase it?
If so, you won’t have a title to provide. Instead, the Chapter 7 Trustee will need a copy of your lease agreement or registration to your leased vehicle.
Your lease agreement is that really long pink or yellow rice paper-thin thing that is impossible to photocopy or scan—and definitely difficult to read. Thank Ally or Toyota Leasing as you struggle for the best way to photocopy it in pieces.
How Do I Get a Copy of a Michigan Vehicle Title for a Chapter 7 Trustee?
Michigan’s Secretary of State Office provides a number of different ways to obtain a replacement vehicle title if you’ve lost the shoebox inside the filing cabinet inside the abandoned camper that you stored yours inside of, years ago.
Replacement vehicle titles may, these days, be ordered online, through the mail, or via the traditional route: an office visit (bring a book).
Depending on mailing and processing time relative to your need to produce your vehicle title to your Michigan bankruptcy attorney in advance of the drafting and filing of your Chapter 7 bankruptcy petition, this latter, office visit method may still be the most time-effective.
Generally speaking, it will take around 14 days to receive a replacement title from Michigan’s Secretary of State.
But what if you need to file for Chapter 7 fast—to stop a garnishment or other nefarious collections activity?
Many Chapter 7 Trustees in the Eastern District of Michigan will, in a pinch, accept an RD108 (application for vehicle title) in lieu of an actual vehicle title. However, you should not count on this and should make every effort to obtain the real title. Even if a Trustee does accept an RD108, there is no guarantee that the Trustee won’t just hold your case open until the actual title is provided. The Michigan Secretary of State website does have a lien search tool in which you can check for liens on the vehicle by entering the VIN# (Vehicle ID Number)
If time is not an issue and, for whatever reason, the Secretary of State is unhelpful, you may still request a copy of your valid lien from your lienholder be emailed to you.
This at least will show the Chapter 7 Trustee some of what he or she is looking for.
Vehicle Titles and Chapter 7 Bankruptcy Trustees: The Bottom Line
The bottom line is that the vehicle title is just one of the documents that your Chapter 7 Trustee will require from you after you file your bankruptcy petition.
Further, aside from the Chapter 7 Trustee, your own bankruptcy lawyer is going to want it before even drafting your petition, as noted above.
When deciding to file for Chapter 7 bankruptcy, you are, at the end of the day, also deciding to put some work into the effort and to gather a large amount of information and documentation detailing nearly every aspect of your financial and even personal life in order to hand it over to someone who absolutely does not have your best interests at heart.
An experienced Metro Detroit bankruptcy attorney is essential to ensure that not only is nothing missed in the effort but that you are as protected as possible through your bankruptcy proceeding.
Attorney Walter Metzen is a Board Certified Bankruptcy Expert who has successfully assisted thousands of Metro Detroit Chapter 7 and Chapter 13 clients for over 30 years.
If you are considering filing for bankruptcy, contact us now to schedule your free initial consultation.