What to do about defaulted car loan

March 25, 2009 9:25 PM

Should I pay back an old defaulted car loan now that I have the money? I still have the vehicle but never drive it. How should I handle this?

Sorry this is so long, but I've got a bit of a sticky situation with my car. It's totally my own fault, but I want to make it right and need to figure out the best course.

Over 10 years ago, I left a bad relationship in PA in a hurry, driving out of state in my car in fear for my life. I was so discombobulated by the whole dysfunctional situation that, long story short, the car went into default and should rightly have been repo'd by the PA bank. I am assuming they attempted to do so but could not because I went far away and almost no one knew where to find me. I don't remember receiving official paperwork (I had a friend who was forwarding my mail for awhile) but I've moved several times and it's possible it got missed or returned undeliverable or who knows what.

Fast forward ten years. I'm now in a totally different place in my life and much healthier in every way, including financially. Even though the statute of limitations on debt recovery has expired in PA, I'm finally in a position to make things right with the bank. And I've always felt guilty about this, so I'd like to pay it off in full. Then I could get the title and be able to drive the car again, which has been sitting for a long time in a safe place without ever being registered or insured in my new state.

Ideally, I would like to be able to call the bank, make arrangements to pay off the loan in one lump sum, and receive the released title in return. But I am worried about getting screwed in several ways:

1) Perhaps the bank put out a warrant or something for me when the repo efforts I am assuming they made failed; although I think they eventually wrote off the loan.

2) I'm wondering if they might just give me a big middle finger and renew their repo efforts if they are able to discover where I am. Worse, perhaps they might appear to be cooperative up until they get contact information and/or money from me, at which point they might then renew their repo/warrant efforts.

3) Failing that, what if a zillion dollars in interest/fees gets tacked on, to the point where I can't afford it like I thought it could? There was something like $17-20k owed at the time I stopped making payments; lord knows what that could have turned into over the past ten years.

4) Say all goes well with the bank and the title; what if paying off a previously written-off loan triggers a renewed ding on my previously (deservedly) bad credit report, only now finally being restored to something decent after all these years? (I've had something similar happen before when I paid off an old 'zombie debt'.) I'm particularly worried about this one because I'm considering buying a house in the next few months.

(I realize there's a certain amount of paranoia going on here. Problem is, I'm not sure how much! Yeah, I'm in a healthier place, but my previous bad relationship obviously left me with some trust issues.)

I'm afraid to even make phone calls to various agencies because I do not want to be tracked down without knowing the risks and options, and I envision the phone jockeys refusing to help me without a VIN/name/address blah blah blah.

So what's the best course for me to take? Are my worries justified at all or am I just being a loony? If I can pay it off, should I do it before or after I buy a house? What should I do? Any advice at all would be greatly appreciated. Thanks!!

posted by Phoenix Ash to work & money (18 comments total)

The problem with old debt is generally more complicated than what you have outlined. Your debt is likely with a collections agency, who bought it for X pennies on the dollar, and will likely attempt to get the loan amount plus interest as soon as they have your current address.

Were I you, this is one of the few instances where I would absolutely contact an attorney local to you or in PA to manage this on your behalf. S/he can contact the bank to find out who holds the debt, does not have to give up your current address, and can negotiate with the collection agency to settle the debt for pennies on the dollar.

The debt forum everyone on MeFi will send you to (which I can't remember the name of) will be able to give you a good idea of what "pennies on the dollar" might look like, and that will be helpful to be able to tell your attorney ("I'm only willing to pay $X") but still, in your situation, I'd feel a lot more comfortable doing this at some distance through a legal representative.
posted by DarlingBri at 9:38 PM on March 25

Hm. I hadn't thought of going through a lawyer. That's a good idea, thanks.

I'm wondering though... I've lived in the same place for awhile now, with credit cards in my name at this address and so forth... so I'm thinking my address is probably not too difficult for collections agencies to find (from my credit report, for instance). So why haven't I ever heard from anyone attempting to collect? This is why I'm thinking maybe the bank just wrote it off a long time ago and said the heck with it...???
posted by Phoenix Ash at 9:47 PM on March 25

www.creditboards.com is the forum I believe Phoenix Ash was referring to. It's very helpful.

Seconding the attorney idea. I agree with you that the bank (or the collection agency they sold it to) has written off the debt, but both are notorious for assessing very large fees on defaults, I would hate to see your goodwill punished and a lawyer is the only way to assure that.
posted by rmtravis at 10:36 PM on March 25

Phoenix Ash: This is why I'm thinking maybe the bank just wrote it off a long time ago and said the heck with it...???

Does it change anything for you if they did? If you want to settle the debt regardless, then your priority is to pay the debt while protecting yourself at the same time. Ten years of interest is a lot of interest - probably more than you expect. Honest to God I would lawyer up and do what my attorney told me, even if that was shutting the hell up.
posted by DarlingBri at 10:42 PM on March 25

I second, third, and fourth the lawyer idea, with an additional suggestion. You might consider doing some research into legal clinics at law schools in PA. You may be able to get free legal advice on this if cost is an issue. Seems it would be an interesting case for students to work on, too. Check out the websites of some of the law schools in PA and look for "clinics". Not all will be suited to dealing with your issue (many focus on specific issues, like immigration law, or family law) but you may find something, OR you may be able to ask them to point you in a good direction for legal help, even if they can't help you directly.
posted by leticia at 3:59 AM on March 26

If it was still the bank holding the bag, I think you'd be right to try to make good. However, they likely sold the debt to jackals a long time ago, and you don't owe the jackals anything-- they BOUGHT the debt, hoping to profit from it.

There's a hornets' nest that's been dormant for ten years, and you want to go whack it with a stick in case there are hornets still in it. Check to see if there's a warrant for your arrest in Pennsylvania and let the rest of it alone.
posted by Mayor Curley at 5:50 AM on March 26

Phoenix Ash: This is why I'm thinking maybe the bank just wrote it off a long time ago and said the heck with it...???

DarlingBri: Does it change anything for you if they did?

No, that was just my thought following your comment about it going to collections and the whole "pennies on the dollar" thing. I was trying to explain why I thought perhaps it hadn't gone to collections, which might make this whole thing easier to resolve.

Ok, so I agree with all the lawyer suggestions, and thank you all for that... and you, too, leticia, about the legal clinics in PA. And I will definitely visit creditboards.com. I'm still left with some unaddressed questions though --

Should I worry about a warrant? or a repo? or a renewed ding on my credit report?
posted by Phoenix Ash at 5:53 AM on March 26

Oops, didn't see your post before I posted mine, Mayor Curley. LOL @ your hornet's nest analogy. You're right, but the problem is, I want to drive the vehicle and I can't because it's not registered or insured. Because I don't have the title because it was never paid off. That, and making right with the bank, is the reason I want to do this. So I can't really leave it alone, unfortunately. I just have to protect myself as best I can from the hornets. Hence all my questioning here, to start!

I wonder.... if the bank sold the debt, did they give over the title too? Hm....something to ask a lawyer about, I'm sure.
posted by Phoenix Ash at 5:59 AM on March 26

You can do two things:

A - Pay off the debt

B - Not pay off the debt.

A is obviously the honorable thing to do. However you have to look at how much the car is really worth after 10 years. Is it seriously worth the 25k you owe on it plus whatever 30% interest they deemed worthy? We end up over paying for a car anyways as is. Your 25K could easily turn into a 50K plus jail time nightmare.

B is the less honorable way but it has worked for 10 years. Look at it this way, screw the bank. They overcharge everyone as is with their interest rates. For 13k car you end up buying it for 19k. You running away did not bankrupt them or cost them anything. They sold it to collectors for probably half of what was owed. They settled and have forgotten about you. Again as stated above Lord only knows what a collection agency is going to charge you in late fees and interest alone. Screw those loan sharks.

I would talk to a lawyer.... not a free one either. I am not too sure if a law student can give you any confidentiality if there is a warrant out for your arrest. I would ask what are your options. See if you can sell the car and then donate it to charity. The money will actually go to do something other than make golden parachutes.
posted by Mastercheddaar at 6:50 AM on March 26

If they wrote it off and/or sold the debt on and then the collection agent wrote it off, you might actually have trouble getting anybody to take your money!

I was involved in a situation involving a bad debt for years back and when I made contact they actually told me I couldn't give them the money now - I no longer owed it to them. And they weren't going to re-open the case, raise the accounting entries or whatever they needed to do to make it a debt again.

Interesting to know who owns the car though.

n'th-ing spending a few hundred on a lawyer. Wish you could let us know what happens.
posted by Xhris at 7:06 AM on March 26

What about running the VIN (from the dashboard/drivers doorjam) from the car through carfax or PENNDOT to find out who currently holds the title (form DL-135), then contact them and ask what steps are needed to release the lien and transfer the title. If you are feeling paranoid you can concoct a story about a roommate left the car/some guy on craigslist is selling it at a great price/etc so if twinges your paranoia you can just say it isn't worth the hassle because it isn't your car and hang up the phone.
posted by saucysault at 8:54 AM on March 26 [1 favorite has favorites]

Mastercheddaar, there is no debtors prison in the US. (The only statutory exception to this I'm aware of is back child support.) You can lose your assets, have your tax refunds taken off you, have your wages garnished, have your possessions repossessed or foreclosed upon, and (depending on whom you borrowed from) occasionally get your kneecaps broken, but you will not go to prison for debt.
posted by DarlingBri at 10:03 AM on March 26

[comment removed - please make this about the loan at hand, not how you feel about loaning generally, feel free to take that to metatalk, thank you]
posted by jessamyn at 2:19 PM on March 26

You borrowed money, and now you want to repay the loan, without unreasonable interest. Yeah, you'll probably need legal help to make sure you're legally okay and not wading into a pile of rabid debt collectors. If you end up not paying it to the creditor, consider making a generous donation to a charity. Maybe there's somebody in a predicament like yours, and a contribution to the United Way, or another appropriate charity, would help them out. It seems like you're doing karma rehab, a fine idea.
posted by theora55 at 5:59 PM on March 26

What darlingbri says about debtors prison is mostly true. However, fraud is a crime. If you never made a payment on the vehicle, ie "first payment default", that can trigger fraud statutes.
posted by pwnguin at 10:30 PM on March 26

Lots of good thoughts here. However --

A) Carfax does not release title or owner information.

B) Penndot's DL-135 form doesn't seem to allow for private parties to pull this information. Although I will be calling them to verify.

C) pwnguin, I didn't commit fraud -- I had been making payments before I left PA. First payment default does not apply.

D) I can't imagine a charity wanting to take a car that has no title. Nor could I sell it without the title, unless I wanted to pawn it off under the table on some poor desperate soul in Mexico or something. Which I don't want to do.

Hopefully a lawyer will give me some good options. I'll be hunting for one.
posted by Phoenix Ash at 11:28 AM on March 27

Small update: I called PennDot and they said I can use the DL-135 for this purpose, and they were nice enough to walk me through the form. Oddly, though, when we got to section F (the 'why do you need this info' section), they refused to help me (per Federal law) figure out which option to check off. I said, What if I check the wrong one? They said it doesn't really matter, they'll still send the info -- but they'll keep the form on file in case it ever comes up. (I'm guessing if someone ever objected to their title being pulled, then Penndot could say, "Hey, you said you were only going to use this for 'x'!" and somebody would get in trouble. But I'm not too worried about that since I'm pulling this for my own car.)

Also, I'm scheduled to talk to a lawyer on Monday. Crossing my fingers...
posted by Phoenix Ash at 12:02 PM on March 27

theora55: If you end up not paying it to the creditor, consider making a generous donation to a charity. Maybe there's somebody in a predicament like yours, and a contribution to the United Way, or another appropriate charity, would help them out. It seems like you're doing karma rehab, a fine idea.

If you like this idea, you might be interested in using the loan repayment money you have to make loans to other people at Prosper or something similar.
posted by DarlingBri at 12:26 PM on March 27