08
Nov
2021
Non-Fatal Clerical Error On Credit Union Lien
A clerical error at the New York Department of Motor Vehicles did not invalidate a Michigan Credit Union’s lien on collateral pledged as security.
Norway Community Credit Union issued a loan to debtors secured by their Chevrolet Corsica automobile.
[T]he credit union, located in Michigan, properly perfectedits security interest in the vehicle and the credit union appeared on the Michigan title as the first secured party.
Thereafter, debtors moved to the state of New York and applied for reissuance of the title through the New York Department of Motor Vehicles (DMV).
Due to a clerical error, the New York DMV failed to record the credit union as a secured party.
Debtors then filed a Chapter 7 bankruptcy; the credit union filed a motion for relief from the automatic stay and for abandonment of trustee’s interest in the automobile.
The Trustee contended that the credit union’s loan was not perfected and sought to sell the vehicle so that the proceeds could be distributed to all of the unsecured creditors.
The court found that the New York State DMV’s clerical error in failing to record the credit union as a secured party did not invalidate the credit union’s security interest and the credit union was, therefore, entitled to possession of the vehicle. In re Alan Beaudoin, 160 B.R. 25.
Author: Charles R. Harroun, Attorney at Law
This entry was posted
on Monday, November 8th, 2021 at 9:08 am and is filed under National, Secured Loans.
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