The Temptation of Title Pawn Loans

Transcript:

Hello this is bankruptcy attorney, Jeff Kelly, and today is September the 9th 2019 and to this podcast title is, “The Temptation of Title Pawns, Why You Should Resist.” Taking out a title pawn loan is as dangerous to your financial health as meth is to your physical health. There’s a reason that title pawn loans are illegal in 30 states, okay, I want that to sink in. They are illegal in 30 states. Why? Because they’re very, very bad for you.

The American Centers for Addiction states that meth is one of the most damaging and addicting drugs that a person can take. Similarly, taking out a title pawn loan for your car is extremely dangerous to your financial health.

Compound interest is great when it’s working in your favor. It’s made Warren Buffett, one of the richest men in the world. Warren Buffett states, “My wealth has come from a combination of living in America, some lucky genes, and compound interest.” Oh yes, it’s great when it works for you, but what happens when it’s working against you? Terrible, terrible things. When you get a title pawn loan, compound interest is working against you in a very, very bad way. 

Let’s talk about how these loans work. Let’s say you’ve got a car were $5,000 and then it’s completely paid off. Typically, I’ll see potential clients come in, and they’ll owe around $1,000 on this title pawn loan. Well, if they screw up and they let that title pawn loan expire, there’s a deadline when they got to make those payments and they, they miss the payments and violate the contract. Guess what happens? By operation of law, that title is going to transfer to the title pawn company, they own your car. It doesn’t matter the fact that you’re still driving it around, it doesn’t matter. They’ve got your title. They’re the owner of the vehicle. Very, very, very bad. The Georgia Department of law their Consumer Protection Division, states at the interest rate the title pawn company is allowed to charge is capped at 25% monthly, that’s 300% annually. For the first three months and 12.5% per month, that’s 150% annually. This means a combined maximum yearly interest rate of 187.5% interest. Oh my god! That is terrible!

So, what do you do? What should you do when you’re, you’re tempted to get a title pawn? Well, I think you really need to ask yourself, “Do I really need… fill in the blank?” I’ll hear clients come in and say, “Well, the reason I did it was, we were so behind on the four-wheeler and I just didn’t want my child to lose his toy.” Well, you know what, if the choice is your kid loses the four-wheeler, or you’re going to pawn the title to your car, forget about the four-wheeler. You can’t lose your car, people lose their car, they can’t get back and forth to work. I mean, that that is losing a car is one of the most disastrous things that can happen to somebody who’s dependent upon that to get back and forth to work. You can’t get back and forth to work. You are going to lose your job. When you lose your job it just cascades. And for a lot of people I’ve seen it start with a title bond. 

Personally, I think the best thing to do is, if you’re having financial troubles, take advantage of a free consultation and come talk to a bankruptcy attorney to review the entire situation. Not just one debt, but all the debts together. What does the big picture say? Again, if there’s any way you can avoid doing a title pawn loan, I would strongly, strongly urge you to avoid it. 

Now, bankruptcy attorneys absolutely hate title pawn loans. Because of the 11th Circuit Court of Appeals ruling in Ray Jonathan Northington. I’m going to cut corners and basically sum up the ruling, but the basic gist of it is, that a chapter 13 is not necessarily going to save you on your title pawn like it used to. In the past with somebody owed a bunch of money to a title pawn company, we would throw it into the Chapter 13 plan and spread that baby out over, as long as five years, and pay the title pawn company back at a reasonable interest rate (not contract of course). But Northington says, no sorry, bankruptcy does not enable you to modify the title pawn rights because the title transfers under state law automatically. Without any hearings, if you don’t pay your title pawn, that title is going to transfer. So, at best, when you file chapter 13, you’ve got 60 days to pay off the entire balance on that loan. If we can’t come up with a plan that does that the title pawn company can come get the car. Now, you know, you’re taking a chance but sometimes the title pawn company will allow a claim to be paid through the chapter 13 plan but, that’s their choice, they don’t have to do that if they don’t want to. 

So, the best thing to do is just avoid getting a title pawn loan altogether. But if you would like to schedule a free consultation with me, please give me a call 7708818449, I’d be happy to sit down and talk to you, if you live in the state of Georgia, about your options, thank you very much. Have a great evening.