Does the lienholder of a vehicle have to be the same as the registered owner of the vehicle?

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Does the lienholder of a vehicle have to be the same as the registered owner of the vehicle?

Debtor of an auto loan sold to a third party the vehicle that his creditor had a lien on. The new registered owner has the new title without knowing about the lien on the vehicle. Does the new owner have legal ownership to the vehicle even if the loan hasn’t been paid for by the debtor?

Asked on February 16, 2011 under Business Law, Hawaii

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If you are the third party you may have a little problem here.  The creditor - lien holder - has priority to the vehicle.  Assumedly the lien was filed and first in time is generally first in right. The debtor sold it subject to the lien, though he did so fraudulently.  How you were able to get a clean title and register the vehicle I will never know, but I think that you have bought yourself a lawsuit here and that you should speak with the creditor and an attorney - or have the attorney do so on oyuor behalf - and set about suing the debtor.  Good luck to you.


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