Bankruptcy of Car Dealerships

The bankrutpcy of a car dealership differs from many other business bankruptcies because the insolvency of a car dealership inveitably results in a summary cessation of funding. An unprepared for cessation of funding will inevitably catch some of the incompleted title transfers in the middle. This results in the lender or other party retaining titles rather than transferring them to the purchasers. In this way, some purchasers may not be able to obtain title to the cars for which they have already paid, unless they pay for them a second time. We have observed that customers who pay for a car and cannot obtain their title quite often rather "vocal." Counsel has, on more than one occasion, been called upon to visit with a district attorney to explain why his client has not committed a crime. We have been fortunate to avoid all such prosecutions of our car dealership clients.

This unpleasant scenario can be avoided if the car dealership recognizes the problem early on and obtains competent legal advice before it is too late. Here, as in practically all of these scenarios, good faith and good intentions alone mean absolutely nothing.

Besides the foregoing, the bankruptcy of a car dealership differs little from other businesses.

Charles Chesnutt