Who gets insurance claim money on totaled vehicle

by Guest » Wed Feb 13, 2013 08:44 pm
Guest

I sold my car to a relative at a discounted price. The amount owed on the car loan was $4,000 dollars on a $7,000 dollar loan. The car was totaled, and insurance paid $9,000. The car was insured by the new owner, does he get the extra $2,000 since the car was valued at $9,000?

Total Comments: 2

Posted: Thu Feb 14, 2013 03:32 am Post Subject:

$4000 of it should go to the lien holder and the remaining $5000 (or $5000 less the deductible) goes to the current owner/insured.

That $2000 difference means nothing. Neither does the $7000. Unless you have a time machine and venture back to when the loan was obtained for $7000.

Posted: Thu Feb 14, 2013 11:46 am Post Subject:

I sold my car to a relative at a discounted price.


Let's forget about the vehicle being damaged for the moment.

What did YOU do with the money from the sale of the car? Or did no money change hands because this was a "deal" done with a relative who would never renege on their promise to pay you each month? Did the loan officially transfer to the new owner, or did they simply agree to continue making the payments on your debt, and you failed to tell the lender about this? Are you listed as the "legal owner" of the vehicle now in the hands of the purchaser, or is the original lender still on title as the legal owner? I think I know the answers to each of those questions.

If the vehicle is still on borrowed money -- meaning you did not get any from the purchaser and have not paid off the loan -- YOU still have the obligation to pay off the loan. Unless the lender agreed to transfer the existing loan into the name of the purchaser, you have set yourself up for a huge problem.

Here's the problem. Unless you are on title as the legal owner of the vehicle, you no longer have "insurable interest" in the vehicle because you sold it to someone else. They don't owe you any money other than whatever verbal agreement the two of you have made, and they don't owe the money to the lender unless they have lawfully assumed the loan with the lender's permission.

You most likely have placed yourself in exactly the same position as a cosigner on a loan. Probably wasn't your intent, but now you have to live with your mistakes.

So, as the new and insured owner of the vehicle, the purchaser may keep the entire $9000 in insurance claims money and leave you on the hook for the debt you have with the lender, same as if you still had possession of the vehicle -- except that you have no insurance money to use to pay off the debt. You will have to turn around and sue the purchaser for their "breach of contract" for nonpayment of the debt they owe you if they don't honor your agreement. In the meantime, the lender will be coming after you for their contractual payments.

An oral contract may be valid and binding, but when it comes to the "he said-she said" side of things, the best storyteller wins. How do you make the judge or jury believe the vehicle wasn't a gift from you to the relatiive, when he stands in front of them and says, "My (aunt, uncle, cousin, whatever) told me I could have the car as a gift, and they would keep making the payments"?? Might just be a believable tale.

Now on to other matters.

does he get the extra $2,000 since the car was valued at $9,000?

I believe the only reason you are asking this question is that you must think you are entitled to this money. Am I right?

If not, why do you care what happens to that money? It's not yours -- you sold the vehicle to someone else. It's their money and they may do with it as they please. As tcope has said, the $2000, $7000, $9000 means nothing. The only thing that is of any consequence is the amount needed to pay off the loan. And that's money you don't have and aren't likely to get anytime soon..

Sounds to me like you've been left holding the bag on this. And now you don't know what to do. Learn not to do business with relatives. Someone almost always gets the raw end of the "deal."

It's a small claims court matter. When the lender sues you for the unpaid loan, you can file a cross-complaint against the purchaser, and the three of you can stand in front of the judge and tell your stories. The judge will decide who the winners and losers are.

With any luck, your case will be picked up by The People's Court or Judge Judy, and the producers will handle the money side of things. The actual case is dismissed and the winner gets compensated by the TV show as the judge decides. The participants all share in any portion of the rest of the total payment agreed to for appearing on the show, if any remains. The usual total payment is the maximum small claims award for your state, but could be a higher flat amount (I don't know exactly how they do it these days -- that's how it used to be done). They also feed you lunch or dinner with the crew during the break from taping a week's worth of shows on one day. The food is usually pretty good.

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