Title Loopholes: Uncovering Hidden Legal Risks

The Expert Podcast

Why is it so hard to get a title for a vehicle?

• If you’ve purchased a vehicle without a title, at a lien sale, or an auction, the process might seem difficult or frustrating. This is because when a title is issued to you, it means all previous ownership claims are extinguished.

The Importance of Proper Titling

• When you receive a title, it excludes all other claims to the vehicle. This ensures that you are the rightful owner, and no one else has a stake in it.

A Case from Texas:

• Companies accused of illegally selling cars owned by service members highlight the risks of improper titling. Failing to obtain a court order before auctioning vehicles can leave the buyer with no title and the seller facing potential legal issues.

The Best Way to Get a Title: Court Order Title

• Court order titles are the safest and most secure method for obtaining a title. Although there are other methods like bonded titles or using loopholes (such as the Vermont loophole), they carry more risks.

Why the DMV Takes Time

• The DMV must ensure that all prior ownership claims, liens, and legal actions (like probate) are cleared before issuing a title. This ensures that your title is secure and cannot be revoked.

The Risks of Loopholes:

• Using methods like bonded titles or alternative approaches can lead to complications later. If the title is contested by a previous owner or a lienholder, you might have to pay out of pocket, and the bonding company could come after you for repayment.

Real-World Consequences:

• A woman’s car was sold at auction for $6,200 while she still owed $13,000 on the loan, with no title given to the buyer. This highlights the dangers of skipping the proper titling process.

Legal Consequences of Improper Titling:

• Vehicles obtained without going through the correct legal process are at risk of having their titles revoked. The U.S. Department of Justice is involved in these investigations, ensuring that buyers, sellers, and owners follow the correct titling procedures.

How to Avoid Legal Problems:

• Opting for a court order title or civil lien method ensures that the vehicle is legally transferred to you, avoiding future claims or title issues.

The Danger of Bonded Titles:

• Although bonded titles may seem like a quick fix, they are risky. If someone contests the title, you could be responsible for paying back the bond and could lose the vehicle.

Takeaway:

• Going through the correct title process the first time ensures peace of mind and eliminates the risk of losing your vehicle or title down the road. Avoid the hassle and legal trouble by doing it right from the start.