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May 2012

Before bankruptcy: How to put Mom on your car title as lien holder

Posted by / in Before Bankruptcy / 25 comments

Before bankruptcy, sometimes you need to borrow money from Mom.  You might want to borrow that money and put her on your car title.

Now Congress made it illegal for me, a bankruptcy lawyer, to advise you to borrow money.  But the Supreme Court said it’s legal for me to tell you that it’s legal for you to do it.  (You may have to read that twice.)

It’s legal for me to tell you that it’s legal for you to borrow money from your mother before you file bankruptcy; although it is illegal for me to suggest that you do it.

I have an earlier blog on why you might want to do that.  It explains why you might want to borrow money from a family member or friend and put them on the title to your car.

This blog, I want to talk about how.

When you borrow money against your car, you give your lender a “security interest” in the car.  Your mother does not become the owner of the car, you still are.  But she has the right to repossess the car if you don’t pay.  (The same as the bank would.)  That right is her “security” that you will pay her.

security interest

You need to give Mom the security interest in your car title at about the same time she lends you the money.

The Virginia DMV has a form for recording a security interest on your car title.  It also works to create the security interest.  You can get that form here.  When you fill in that form and take it to the DMV, the DMV puts your mother on the title to your car as a “lien holder.”

(When your Mom or other family lender has a security interest in the car, she has the right to repossess the car, if you don’t pay.  That’s a right against you and your car.  When the security interest is perfected–put on the car title at the DMV–then your mother has a right to the car that’s in line ahead of other people–like the bankruptcy trustee.  You want Mom to be in line in front of the trustee–I explain that here.  That means the trustee can’t sell the car and pay your mother two cents on the dollar along with the credit cards that you are wiping out in the bankruptcy.  And it avoids the problem of you having to walk to work because the bankruptcy trustee sold your car.)

If Mom lends you money against the car, you need to give Mom a copy of the form at about the same time she gives you the money; and you need to take the form to the DMV within 30 days.  If you take longer than 30 days, then it’s a “preference”–in bankruptcy, preferences are bad.

While you are doing the paper work on this, you should probably also do an I O U.  What friends call an I O U, lawyers call a “promissory note.”  Suze Ornman has a form here. Your I O U is your written promise to pay back the money you borrowed.  The security interest is the right to repossess the car if you don’t keep that promise.

For the paperwork to be complete, you should do both.



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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

  • the NevadaGal

    May 30, 2012, pm31 2:30 PM

    Mr. Weed,

    I can’t help but make a comment about this blog post. You were right that I’d want to read this twice:

    “Now Congress made it illegal for me, a bankruptcy lawyer, to advise you to borrow money. But the Supreme Court said it’s legal for me to tell you that it’s legal for you to do it. (You may have to read that twice.) It’s legal for me to tell you that it’s legal for you to borrow money from your mother before you file bankruptcy; although it is illegal for me to suggest that you do it.”

    I often wonder what people do when they don’t have a lawyer like you in their corner. There are so many people who just don’t know how convoluted and twisted laws have become: what was meant to help us now actually goes against us. If you ever decide to run for public office I just might have to move so I can vote for you. You, Mr. Weed, are a breath of fresh air and a lawyer with obvious character. Keep up the great work and thanks for helping us consumers understand more about how bankruptcy can help anyone get a fresh financial start.

    The Nevada Gal

  • Jai

    November 14, 2012, pm30 4:08 PM

    Suppose you have a judgement against you and you buy a new car several months later with a loan from your mother. 1) Is the judgement and automatic loan on a car, one bought months after the judgement was ordered. 2) You mentioned a “preference” in bankruptcy if 30 days passed before you record the lien with the DMV. How does that work if you are not filing BK but the judgement holder wants to go after your car to satisfy the judgement? Thank you for any info you can give on this.

    • Robert Weed

      November 14, 2012, pm30 5:27 PM


      You definitely should have put mom as a lien holder on the car promptly when she financed it for you. But if you didn’t, you should do it now.

  • Cindy

    January 8, 2013, am31 9:49 AM

    We are seriously thinking about filing but I am really concerned about losing my vehicles. We have a 2007 Toyota Tundra that we still owe about $16k, 2007 Ford Mustang that we have the title to but I still owe about $3k on due to a family loan to get it back from the repo man (the car was purchased in 2005 and is our 20 year daughters car who uses this to get back and forth to college), 2003 Hyundai Sante Fe (paid in full and have title) that has over 122,500 miles on it and about to need some major work (thinking it is valued at no more than $4k). Then my biggest concern, I personally own a 1970 Ford Mustang (no liens) and lastly a 2004 BMC motorcyle (no liens). Besides our house, which we saved from foreclosure with a reduction plan from our mortgage holder, we really do not have any abundance of personal property.

    I was reading over the above, and my mom has loaned us probably close to 10K if not more over the course of the two years that my husband was laid off from work (September 2010 – May 2012). He has since returned to work, however the job he is on temporary and he will be most likely laid off again within the next couple of months. The job is expected to be completed by the end of March 2013.

    I appreciate any help that you can offer. We are located in Manassas, VA and I do plan to contact you about handling our case.

    • Robert Weed

      January 8, 2013, am31 11:30 AM


      1970 Mustang could be worth anywhere between $2500 and $50,000 depending on its condition. Take it to Carmax and see what they would offer you for it. That will tell us how much of a problem it will be.

  • Cindy

    January 8, 2013, pm31 2:03 PM

    Thats a problem right now because something is wrong with it and won’t start. I could tell you that I could probably get about $20,000 to 25,000 for it.

  • Del

    February 7, 2014, pm28 4:36 PM

    First, many thanks for offering the kind of ‘outside-the-box’ advice that is rarely found online.

    I read this particular blog entry with great interest more than a year ago, but never acted on the advice offered due to some uncertainty with my situation. I’ve been queued up for a Chapter 7 filing for several years now. My house was lost to foreclosure mid-year 2009 and I’ve been advised, given the amount time that has elapsed since that event, that it may be worth waiting to see if the holder of the (now) sold-out junior lien [$180k non-purchase money HELOC 2nd] decides to sue me. I’m hoping to avoid a bankruptcy filing. As I understand it, heretofore, such suits are extremely rare. I’m in Arizona, where the noteholder has six years from the time the loan changed from secured to unsecured debt (the auction date) to file a lawsuit related to collecting on this note.

    When I first read this blog entry I had a leased vehicle that I planned to purchase at lease expiration with a loan from Mom. She had the money stashed away at home and gave me the funds in cash to buy out my lease. I converted the funds into a cashier’s check and forward the money on to the finance company. When it came time to for her sign the promissory note I had prepared, she told me she couldn’t do it because her being a lien holder had the potential to create a problem for her when she runs out of money and has to apply for State long term care benefits.

    The title and release of lien came in the mail weeks later, but I’ve yet to complete the title transfer process with the State of Arizona. I’m not really sure what to do here. I’ve had friends and family members offer to take her place as lien holder and signer of the note, but I’m concerned the year long delay might somehow effect the perfection of the lien and leave me vulnerable, should the holder of my old HELOC note decide to sue me in the next year and a half, and a Chapter 7 filing be required to nullify that effort. Did delaying the title transfer preserve my ability to add a lien holder or does the date the leasing company signed release of lien trump everything here?

    Absent the ability to add a lien holder to my title transfer process, would a title loan at the first whiff of being sued offer me similar protection against losing my car? The only other concern is a $7k judgment from a credit card company (bank). The car is five years old now and worth roughly $12k. Arizona allows a $5k auto exemption for bankruptcy purposes. Thoughts?

    Thank you in advance for any additional advice you may be able to offer.

    • Robert Weed

      February 7, 2014, pm28 4:39 PM


      You’ve analysed your situation really well. I can’t add to what I’ve said–and what you’ve said–because I know nothing about Arizona law. I post all this to help my clients–and I’m giving them personal advice, too, so it’s just a reference for them. For people out of state it’s a guide for people to discuss with their own lawyers.

      • Del

        February 7, 2014, pm28 5:19 PM

        Wow. That was fast. 🙂

        I can certainly understand that State specific particulars make it hard to offer more detailed advice for those living in states other than your own. I’m really just trying to be sure that I haven’t overlooked something important to consider and thought your unique understanding of the nuances here could be instructional; not only to myself, but for others out there wrestling with the same challenge.

        I’m very grateful for everything that you have shared here already. I know this blog is intended for a more local audience, but its broader reach and ability to offer help to others is a blessing to many more than you may imagine. Thank you, sir!

      • Delilah

        March 24, 2014, pm31 4:16 PM

        Thank you so much for the advice. Do you know if this applys in California? I wasn’t able to find that form or any information on the California dmv wedsite. Do you have any advice for me living in the state of California?

        • Robert Weed

          March 24, 2014, pm31 4:25 PM


          Sorry, I can’t shed any light about California law.

  • Kathy

    March 1, 2015, pm31 10:35 PM

    Would the same go for a house? I live in NC & it would be my sister. Honestly I might get a dollar. But I believe I got your point. House too????
    Thanks for your great advice!!!

  • Lisa

    October 4, 2017, am31 11:29 AM

    Good afternoon, I am not sure if you still respond to this thread, but I was hoping if you do, you could give me your take on my situation. I am in Florida and the vehicle exempt is $1000 – my mom (who lives in AZ) loaned me money for my vehicle, I have proof of her transfer into my account and an immediate check wrote out to the car dealership – we tried first to get a loan with me as a co-signer but because of my credit, me being in Fl and her in AZ, it was cheaper and best for her to loan me the amount in full. I’ve had a short sale judgement against me for over $100,000 a few years before the auto loan, but unfortunately I procrastinated and have not filed any lien on my vehicle in my moms name. I have been wanting to file BK for a number of years and I have had a lot more medical debt pile up due to medical issues and am now finally going to file in 6 months. The BK attorney I met a year ago was concerned over the delay in filing a lien on the vehicle and believed they may not accept it because of debtor preference.. So my question is, I have proof that she deposited the money and it went to the dealership the same day, in the exact amount of the deposit. It is 100% true that I owe her, it was not a gift. Will the trustee accept this? I also wanted to put my daughter who is now 18 on my title, I don’t know if that would also help, she is insured on my vehicle. It’s value is about $9,500 – my mom loaned me $15,000 and I also had a $5,000 trade in. I purchased the vehicle on Dec 23, 2015. Thank you for any advice you can give me!

    • Robert Weed

      October 5, 2017, pm31 4:50 PM


      I’m agreeing with the Florida lawyer you talked to. If you had put mom on the title to the car right away, that would have been ok. But now that you waited, putting her on is a “preference.” If you file BK within a year of putting mom on the title the trustee can kick her off the title and sell the car. Sorry.

      • Lisa

        April 22, 2018, pm30 12:44 PM

        Thank you! I didn’t see your response until now. I did put my daughter on the title on December 24, 2017. I had major water damage to my home two months ago and my mom is going to loan me money for repairs. I want to use my vehicle for security. I have a promissory note and security agreement (one document), detailing the consideration, value, vehicle and repayment arrangement with a brief repossession clause. Can I now put a lien for the loan amount? I will have the agreement, lien and copy of the check for the loan. She will file the lien with the motor vehicle dept as soon as possible. I will deposit the check and keep an accounting of the expenses I am paying for the repairs. I hope to file bk around next January (2019). Would this still be considered preference? Thank you so much!

      • Lisa

        April 26, 2018, pm30 2:18 PM

        Thank you Robert, I am not sure what happened as I thought I replied but it is not showing up. I really appreciate your time in responding to all these questions! I had a recent flood in my home caused by plumbing issues in my shower, and I was going to borrow money from my mom for the repairs. It pretty much destroyed all my flooring in my small home. If I put a lien on the car for the new loan, have a promissory/security agreement listing my vehicle as the security, and maintain a copy of the check she is sending me and a full accounting of the loan showing all the expenses for the house, will that be an issue? I hope to file bk by the end of the year but I need house repairs like yesterday!
        thank you again!

        • Robert Weed

          April 26, 2018, pm30 2:47 PM

          Lisa: What you say sounds good to me. BUT if I were your lawyer I would want to SEE the papers to make sure you’ve done it right. Since I’m NOT your lawyer and can’t see them, I can’t give you personal advice. Sorry

  • Bella

    April 4, 2018, pm30 5:15 PM

    I live in Virginia and am considering filing for bankruptcy. I purchased a car for around $12,000 on May 13, 2016. My mother paid by a credit card (which she paid off immediately). The car was titled solely in my name. My mother and I signed a promissory note dated on the date of the sale. On or about June 20, 2016, my mother obtained a supplemental title showing her lien on the car. The supplemental lien title says: Established 05/26/16. The “date issued” on the supplemental title shows 06/20/16. The question is whether or not the lien was perfected such that the Trustee can’t take the car. From your article and the law I gather that the lien can be perfected within 30 day. I guess the question is when does the 30 days start? Is it on the date of purchase or the date the title was first established? Any thoughts would be greatly appreciated!

    • Robert Weed

      April 9, 2018, pm30 5:32 PM

      Established 5/26 is the relevant date. BUT once it’s been over a year, and you’re talking 2016, the 30 day rule doesn’t apply any more. I’m not your lawyer, and your lawyer should look at the documents. But from you you told me, you did it exactly right.

  • Sonia

    June 15, 2018, pm30 2:29 PM

    Hi, I am filing for bankruptcy in Florida in August 2018. I own a 2007 Toyota Solara that is vauled at $4100. I was told to take out a lien from a car title loan company. Wouldn’t this also fall under the “preference” rule you’ve mentioned or does this only apply to individuals? Also, if the best option is to go through with this lien, is there a specific amount or time frame to repay the loan I should be aware of?

    Thanks in advance,


    • Robert Weed

      June 16, 2018, pm30 3:32 PM


      I don’t know enough about Florida law to know if you should or shouldn’t do that, sorry. I do know a lot of things people are “told” by friends are completely wrong.

  • Kimberly Driscoll

    March 24, 2019, am31 9:13 AM

    Thank you so much for all of this information! I have a question, if I am to add my father as a lienholder on the title of my car does he need to be here to file the papers as he lives in Florida and I live in New Jersey? Or can I do it and submit the forms to my DMV when I purchased the car?

    • Robert Weed

      March 25, 2019, am31 9:23 AM


      Sorry I know bankruptcy law, but nothing about DMV procedures in New Jersey.

  • Rocy

    July 7, 2022, am31 1:44 AM

    Hello, I’m trying to file bankruptcy. Months ago I transferred my car tittle to my moms’ name as gift because I owe her some money. I did it because I was worry and never thought of filling bankruptcy. Can I ask her to tranfer the car under my name, putting her as liean in car’s tittle so I can file for bankruptcy. Is doing something like that get me in trouble or will raise questions of fraud?

    Thank you

    • Robert Weed

      July 8, 2022, pm31 12:20 PM

      You need to have your local lawyer look at the exact dates and timing of everything and the value of the car–and then make the best guess.

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