It's Football Season: Let's Talk Title-Backs!!!


11th Circuit decision gives hope to some consumers struggling with vehicle title pawns



As discussed in detail in a previous blog entry, a 2017 decision by the 11th Circuit Court of Appeals (the Federal Circuit covering Alabama, Georgia and Florida…and all of the good SEC teams) made it difficult or impossible to use Chapter 13 bankruptcy to deal with motor vehicle title pawns.  The 2017 Northington case held that if a bankruptcy case is filed after the “redemption period” on the title pawn has expired (usually a 60-day period), then any ownership interest the borrower/pledgor had in his or her motor vehicle was automatically extinguished.  That meant the title pawn company no longer held a claim that could be addressed in bankruptcy – instead, the company owned the vehicle itself! 

The Northington case means that once the redemption period expires, a Chapter 13 bankruptcy plan cannot be used to pay the title pawn loan over time as can be done with most other types of short-term loans.  The expiration of the redemption period meant “Game Over.” 

This August the 11th Circuit addressed the title pawn question again in a case titled Womack v. TitleMax of Alabama, Inc.  This time, the vehicle owner declared bankruptcy 11 days before the expiration of the redemption period on the title pawn.  The Court found this difference to be significant and held that the vehicle owner could use a Chapter 13 bankruptcy plan to modify the pawnholder’s rights and pay the loan back over time.  Since the debtor still had an ownership interest in the vehicle at the time she filed the bankruptcy case.  The Court noted: “a pawnbroker’s right to title and to possession of a pawned vehicle ripens only on expiration of the redemption period; until that day, the pawnbroker is a ‘lienholder’ who ‘is entitled [only] to the amount of its interest in the automobile’.”

As with many legal issues – and like a tight game in the closing minutes of the fourth quarter – time-management is critical!  The fact that the vehicle owner in Womack had not defaulted on the loan at the time she filed bankruptcy made an enormous difference.  If you are struggling to pay off a title loan before the expiration of the redemption period, you should meet with an experienced bankruptcy attorney as soon as possible to see whether a bankruptcy case would be in your best interests.  Be sure to let the attorney know right away about the date of the title loan and the redemption deadline so that he or she will understand that your issue is time sensitive.  There are many considerations that go into each case, and there may be other reasons why a bankruptcy case might not be the right solution.  Thanks to the Womack case there is a tool available to some vehicle owners with title pawns.  With possession and time on the clock, anything is possible! 

The 7thirteen is a blog written by Jeff Narmore, focusing on consumer bankruptcy issues.  Visit my website at narmorelawoffice.com for more information.  Narmore Law Office LLC is a debt relief agency and helps people file for relief under the United States Bankruptcy Code.  


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