Is it true that some type of legal document overrides what the loan company would prefer? 1 Answers as of March 27, 2017

Senior friend of mine is having financial problems. She owns an older vehicle with a balance of $6,000 on the loan (car value is more like $4,200). She wants to sell it but the loan balance and value are a big problem. My friend wants to sell the car to her daughter through some sort of legal paperwork where the loan/car/and title will be shifted into the daughter's name and financial responsibility. Neither my friend nor her daughter is good money managers and I cannot believe the car loan can be shifted into someone else's name. If I were the car loan company, I wouldn't be very pleased.

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Edelman, Combs, Latturner & Goodwin, LLC | Daniel A. Edelman
The transfer of collateral (car) without the consent of the lender is an act of default under most contracts. However, if you are in default and can sell the collateral, the lender is obligated to respond in a commercially reasonable manner even if the sale is not enough to pay the debt. So if you can sell the car for $4200 cash in such a way that the lender is assured of payment, even though the debt is $6,000, the lender cannot refuse to take the $4200, repossess and sell the car at auction for (say) $2,000, and try to hold the consumer liable for the $4,000 difference. It is not possible to transfer liability to make payments to another without the consent of the lender.
Answer Applies to: Illinois
Replied: 3/27/2017
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