[Vtr-tac] Dealer Bankruptcy/Non-Bankruptcy Closures

Electronic Distribution of VTR Information to Texas Counties vtr-tac at dot.state.tx.us
Tue Dec 16 14:38:29 CST 2008


Dear Tax Assessor-Collectors:

Please review and distribute as appropriate.

We understand that the counties are struggling with how to respond to
customers who have been unable to complete the title and registration
process for vehicles they purchased because their dealer closed
unexpectedly or filed for bankruptcy.  TxDOT*s MVD, VTR division, and
the State Comptroller*s Office have met and agreed on the following
policy/procedures to try to resolve the problem of titling and
registering vehicles and tax responsibilities for these customers.

Caution:  For purposes of this procedure, the term *bankrupt
dealer* only refers to a dealer that has filed bankruptcy and is
closed for business.  These procedures do not apply to situations where
bankruptcy has been filed for reorganization purposes and the dealership
continues to operate.  Transactions filed by a dealer under
reorganization bankruptcy should be processed as normal.

The steps for processing transactions from closed or bankrupt dealers
are similar to normal title processing as shown below, however, before
processing can begin, you must determine if the dealer has filed for
bankruptcy.  Even though the processing steps are similar to those
normally followed, each step has nuances so you are encouraged to read
the information carefully.

Processing Steps for Closed/Bankrupt Dealer Title Transactions 
- Determine if the dealer has filed for bankruptcy  
- Determine if the customer has acceptable proof of payment 
- Determine if the customer has acceptable proof of ownership
documents
- Process the transaction
- Determine appropriate fees
- Package the paperwork

Closed /Bankrupt Dealers List
The most current list of closed and/or bankrupt dealers is available at
FTP address
ftp://ftp.dot.state.tx.us/pub/txdot-info/vtr/dealer_bankruptcy_chart.pdf
.  This list is meant to help make the determination, however, this is a
constantly evolving situation, so if the customer has bankruptcy
documents in hand, process the transaction according to the steps listed
in the Dealer Closure: Bankruptcy section shown below.  This list is
compiled to the best of TAC, TxDOT, and Comptroller staff capability to
verify unexpected closure or bankruptcy.  Please don't distribute this
list to the public,  If you know of any additions or corrections please
send them to VTRintranet at dot.state.tx.us as soon as possible.
 
DEALER CLOSURE: NON-BANKRUPTCY
Ownership Documents required: 
1.	Negotiable ownership document properly assigned.  If
unavailable, standard options of a TAC Hearing, Bonded Title or Court
Order required
2.	Form 130-U signed by the applicant

Payment Documents required: 
1.	Original or Certified Copy of one of the following:
	a) Dealer Sales Contract
	b) Bill of Sale,
	c) 31-RTS Receipt; or
	d) Invoice
If these documents itemize tax, title and license (TT&L) and indicate
these fees have been paid, then all registration and title fees and
taxes should be waived for the customer when processing the transaction.
 If the amounts are not itemized, or payment documents are not
available, the transaction may be accepted if all other documents are
available, however, all required fees, tax and tax penalty must be
collected.

Additional Document required for Cash Sales: 
1.	Affidavit of Fact - Due to the time lag between initial
completion of the paperwork and actual title filing an additional
affidavit will be required to support *no lien* title applications
attesting there is no lien on the vehicle at the time of title
application.

DEALER CLOSURE:  BANKRUPTCY
Before a transfer of ownership may be processed when a licensed motor
vehicle dealer files for Bankruptcy, a Court Order must first be issued
releasing the vehicle as an asset and awarding ownership to title
applicants. The Court Order or attached Exhibit must specify title
applicant(s), any known lienholder, and VIN.  

Every Court Order may define different specific requirements but they
fall into three basic scenarios:

Scenario 1:  Title applicant(s) must provide all required title
transfer documents properly completed.  If a required document is not
provided, the customer should be advised to contact the bankruptcy
attorney for the required document. 

Scenario 2:  The Court Order may specifically eliminate the requirement
of the seller*s signature on any or all required documents such as the
form 130-U, odometer statement, etc.  In essence, this allows the Court
Order to substitute for the particular ownership document named.

Scenario 3:  If the applicant is not listed in the Court Order they
must contact the bankruptcy attorney and request to be added to the
order even if they have all the required transfer documents.  This will
protect the vehicle from being included in any future distribution of
the dealership assets by the court and will allow waiver for the
customer of any fees previously paid.

Ownership Documents required: 
1.	Original Bankruptcy Court Order, a certified copy of the Court
Order, or a copy of the Court Order supplied by the department
electronically including the Exhibit that specifies the title applicant
and vehicle
2.	Negotiable ownership document properly assigned
3.	Properly completed Form 130-U
4.	Any other supporting document required in a standard title
transfer (POA, odometer  statement, etc.)

Payment Documents required: 
1.	Original or Certified Copy of one of the following:
	a) Dealer Sales Contract
	b) Bill of Sale,
	c) 31-RTS Receipt; or
	d) Invoice
If these documents itemize tax, title and license (TT&L) and indicate
these fees have been paid, then all registration and title fees and
taxes should be waived when processing the transaction.  If the amounts
are not itemized, or payment documents are not available, the
transaction may be accepted if all other documents are available,
however, all required fees, tax and tax penalty must be collected and
the Court Order must identify the vehicle.  (See scenario #3.)  

NOTE:  One of the Payment documents listed above may be used to provide
the VIN and vehicle description if not stated in the Court Order if the
purchaser*s name and lien holder match.  

Additional Document required for Cash Sales: 
1.	Affidavit of Fact - Due to the time lag between initial
completion of the paperwork and actual title filing an additional
affidavit will be required to support *no lien* title applications
attesting there is no lien on the vehicle at the time of title
application.

SUBMITTING TRANSACTIONS TO VTR
Counties should submit transactions involving dealer bankruptcies and
closures to TCS in a separate envelope labeled DEALER
BANKRUPTCY/CLOSURE.  

CONTACT INFORMATION
TAX - Questions about sales taxes should be directed to Curt Swenson,
Comptroller*s Office, at curt.swenson at cpa.state.tx.us .  

TITLE - Questions concerning acceptable transfer documents should be
submitted to Monica Blackwell at mblackw at dot.state.tx.us .  

DEALER COMPLAINT - Customers who wish to file a complaint or notify the
MVD should complete and submit a complaint form available on our web
site at
http://www.txdot.gov/drivers_vehicles/consumer_protection/dealer_complaints/default.htm


Bill Heard Chevrolet Dealership/Landmark Chevrolet Dealership
Bankruptcy CONTACT - 

Derek F. Meek
Attorney
Burr & Forman LLP

Direct: (205) 458-5471
Main: (205) 251-3000
Fax: (205) 244-5679
dmeek at burr.com 

DEALER BONDS
While the dealer relationship for title transaction processing is
strictly between the dealer and the county, we suggest that counties
consider reviewing their dealer bonds on a regular basis to ensure they
have adequate coverage to protect themselves if dealer bankruptcies or
closures should occur.  Additional information regarding tax
assessor-collector liability for closed or bankrupt dealer transactions
will be sent later.

Please use the contacts noted above for specific questions concerning
applicable dealer bankruptcy and closure questions.  If you have any
other questions or need any additional information please contact your
local Vehicle Titles and Registration Division Regional Office.

Thanks,

--Rebecca

If you have any comments or suggestions concerning this VTR
communication process, please contact your local VTR Regional Office.

If you would like to see previous postings from the "VTR Electronic
Archives," please visit
http://extlists.dot.state.tx.us/pipermail/vtr-tac/ .

----------------------------------------
Rebecca Davio
Director
Vehicle Titles and Registration Division, TxDOT
Telephone: (512) 465-7570
FAX: (512) 467-5909
Email: rdavio at dot.state.tx.us 
 
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