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Unregistered Car loan

If a person has a car loan from Bank X, and this person realizes that the bank didn`t ever register a lien for the car that was purchased, what will happen to the car/loan if this person files a consumer proposal or bankruptcy??

Posted from: Alberta

One Response to “Unregistered Car loan”

Barton Goth GCO Bankruptcy Trustees said...

This is a complicated issue and you may want to discuss this with a lawyer as it is based on the Personal Property Security Act, an act that a trustee will be more familiar than I.

However, I do have a working knowledge of this legislation and you will find that in the absence of a bankruptcy or a proposal the failure to register doesn’t mean that that the security isn’t valid. Essentially when not dealing with a bankruptcy or proposal the PPSA serves like a bulliten board and is used to determine the ranking of security (i.e. the first valid scurity to register against the property is the first security to get paid).

Now this all changes in a bankruptcy or a proposal. So what you will find is that typically if the security isn’t registered priot to the filing of a bankruptcy or a consumer proposal then it is not considered to be valid. So therefore the fulll value of the vehicle is seen to be an asset, and if the value is greater than the provincial exemption (in Alberta it is $5000) then it is an asset that the trustee will have to realize on / consider in determining what needs to be paid into the trustee.

From the sounds of it this is somehting you should sit down with a local trustee to discuss in more detail.