Strict Time Limits to Perfect Your Lien

The lien holder will lose all interest in the vehicle if their lien is not perfected in time and the debtor files for bankruptcy.

Many states have a time limit to properly file a lien to protect against a bankruptcy. The lien holder needs to make sure the vehicle is registered with the proper lien within the time frame required by that particular state.

Whether the vehicle is sold by a dealership or an individual it is crucial that the collateral manager follow through to be sure the lien is filed. Sometimes when a vehicle is sold by a dealership they are required to file the lien. Sometimes the debtor files the lien at the time of registration. Many states allow a lien holder to file a notice of lien online to ensure that it is done on a timely basis.

If this is not accomplished and the debtor subsequently files for bankruptcy protection, your lien is effectively unsecured resulting in loss of asset and loss of protection.

For example in Missouri: the lien must be perfected within 20 days of the date of purchase if you want to be protected in the case of a bankruptcy; otherwise the bankruptcy trustee can and likely will have your lien nullified.

This is not intended to be legal counsel, please consult your attorney for further advice.