What happens if I pay someone else’s car loan before bankruptcy?
The bankruptcy court could potentially take the recent payments back from the owner of the car.
Why does this matter?
Because the law looks at ownership differently than ordinary people do.
In Minnesota, bankruptcy law says that the person whose name is on the car title is the owner of a car.
This causes trouble in the situation where someone buys a car, but puts someone else on the title for some reason, such as having a better credit rating.
The person who bought the car drives it, and makes the payments thinking that they own the car, but the law thinks that the person who agreed to be on the title because he had a better credit rating owns the car.
A similar situation can also arise where someone buys a car, but doesn’t transfer the title over into his or her name.
PAYING SOMEONE ELSE’S Car LOAN BEFORE FILING BANKRUPTCY
Why is this a problem in bankruptcy?
Because if you buy a car in someone else’s name and make payments on it, then the court will think that you have been paying off someone else’s car.
- It is OK to pay off your own car in the time before filing for bankruptcy because you need a way to get around and to work, but you are not allowed to pay off someone else’s car because that would be unfair to creditors
- Minnesota courts often look at paying a car loan on a car that isn’t in your name as a preference, and can seek to get the money back
- If the person whose name is on the title is a friend, family member, or relative, then the trustee can have the power to get back all the payments for a full year from the person whose name is on the title
HOW CAN I PROTECT MYSELF FROM THIS?
The best way to protect yourself from this is to make sure that the only car title on which your name appears is your own car.
It is also wise to make sure that when you buy a car, you buy the car in your name only.
WHAT TO DO NEXT
If you’re thinking about paying someone else’s car loan before filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Minnesota, then why not not speak to us now at 612.824.4357?
We’ll give you all the help and advice you need.
We’re looking forward to helping you.
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