An ownership card contains information about a debt and security interest held by a lender. It is important to review it carefully. Using a title document makes the lender a secured creditor, giving them priority in recovering assets in the event of bankruptcy. Permission from the creditor is needed to sell or transfer something named as a security interest. Once the debt is paid off, the lien must be revoked to remove the creditor’s claim on the asset.
An ownership card is a document that contains information about a monetary obligation coupled with the specifics of a security interest held by the lender. This security interest is usually a lien on a movable piece of property. Chattel cards are used in a wide variety of settings. As with any legal document that contains information about debts and liens, an ownership document should be carefully reviewed by both parties to confirm that it contains accurate information.
In a simple example of an environment where a title document might be used, an equipment rental company might lease equipment to a business and maintain a lien on the equipment. In the event that the company fails to make its lease payments, the equipment rental company could take back the equipment. Similarly, when goods are sold on credit, a title deed may be drawn up to give the seller the right to seize the goods if the debt obligation is not met.
Using a title document turns the lender into a secured lender. Being a secured creditor can be important if someone goes bankrupt, because secured creditors have the first claim on any asset. When a business fails or someone files for bankruptcy, secured creditors are first in line to recover the items they hold liens over and to recover their debt. Conversely, unsecured creditors have to wait and hope that there is something left over to cover the debts owed to them.
If someone wants to sell or transfer something that is named as a security interest by a creditor, permission from the creditor must be obtained for the sale or transfer to go through. In a simple example, someone paying off an auto loan needs permission from the bank to sell the car, and generally has to meet requirements such as selling the car for enough money to pay off the loan. Buyers should exercise caution when purchasing something that is named in a title deed and should take the time to confirm that the sale is permitted and that the lien will be revoked or transferred by agreement if they wish to assume the debt obligation.
Once the debt obligation is satisfied, it is important to ensure that the lien is revoked. In the car example above, if someone paid off a car loan, the title of the car would have to be changed to remove the lender’s name. Otherwise, the lender still has a security claim on the vehicle and could potentially foreclose on it even if the debt has been settled.
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