Using Mechanics Liens To Get Titles

Why Mechanic’s Lien Titles Are Challenging
So why is it so hard to get a mechanic’s lien title for a vehicle, and why is it not always the best way to try to get a title? For many years, repair shops, garages, and towing companies have used the mechanic’s lien or towing lien process to get titles for vehicles. A lot of times they thought the vehicles were abandoned, and they wanted to get a title. They even sometimes took payments from outside parties to go through a fake mechanic’s lien process to get a title. A lot of times people with title problems will ask, “Well, can I just put a mechanic’s lien on the vehicle, or I’ll just file for an abandoned mechanic’s lien?”

The Purpose of Mechanic’s Lien
Here’s the problem: the mechanic’s lien process is a privilege provided to licensed automotive repair shops in order to get paid for work that a customer stiffed them on. So, somebody brings in a car to get fixed then decides they don’t want to pay. The mechanic’s lien is designed exactly for what the words mean mechanic’s lien. It’s not really a title process; it’s a way to get paid for your mechanic’s work. However, that privilege is very frequently abused or “abused” is a strong word, but it’s expanded to try to get mechanic shops to get titles for vehicles where maybe it’s a different story.

Government Tightens Mechanic’s Lien Process
So what the government has done, what the different state DMVs have done, is to make the process very, very, very hard to do harder than any other process. It’s harder than a bonded title, harder than a court-ordered title, harder than any other type because they want to make sure that if the repair shop is doing it, that’s actually what they want to do. And here’s an example why. Here’s a very common case; you could look any day of the week, any week of the year, and you can find more cases like this where some repair shop owners are committing title fraud.

Repair Shop Owners Committing Fraud
Those are the key words of the headline: repair shop owners, title fraud. What they will do is make up fake work orders and fake records to say they’re filing a mechanic’s lien. They use the process to get titles for vehicles that maybe they bought at an auction with no title. Maybe their buddy bought it on Craigslist, maybe it has a lien they’re trying to get rid of, and because this process is very frequently abused by repair shops, the government knows this. The government is not stupid. They know that this process is a loophole that a repair shop can use to get a title, so they scrutinize every single one that comes through, and they audit them. They also use AI and algorithms to catch shops that are doing too many mechanic’s liens.

Government Scrutiny and Auditing
How do they find that out? Well, what they do is they look at your payroll, and they look at the sales tax you collect, and they know how big your shop is, right? So if you have one or two employees and you collect sales tax that maybe indicates you work on three cars a day, 100 cars a month on average, they know that you should maybe do two or three mechanic’s liens a year based on the statistics. If all of a sudden you’re doing more than that or you do three in one month, now they’re going to scrutinize that business. This is how people get caught, and this is what happened here, and they’re charged with a crime. This is actually a fraud crime in most states that you can get in trouble for.

Legal Consequences of Title Fraud
The Department of Motor Vehicles, which handles titles, arrested these people for the scam involving illegal lien sales of vehicles. There were five vehicles not that many, five vehicles but they were $60,000 vehicles because they added up to $300,000. Some high-end exotic vehicles. Falsifying title documents is the same as stealing them. This is what their compliance enforcement officer said. So if you’re ever tempted to use fake records or fake mechanic’s liens, or let somebody do it on your behalf, this is how the government looks at it: falsifying title documents is the same as stealing.

Mechanic’s Liens as a Privilege
That’s what they say. Now, whether you agree with this or not, we don’t have an opinion about it; it’s just the way that it is. The government knows that mechanic’s liens are necessary for legitimate licensed garages to get paid for their work on cars. But they also know that when you give that privilege, some people are going to abuse it, and some people are going to try to get away with getting free cars. How bad is the penalty? Well, they could face prison terms of 20 years – 20 years and restitution, meaning that they might have to pay back that $300,000. Now they’ll probably plea bargain it down a little bit, but it’s still going to be probably a felony.

The Fraudulent Mechanic’s Lien Case
One of the people was the owner of S&M Auto Body, right? So another one was the owner of Sharp Transmission. Investigators say they falsified work orders for repairs and then sold the vehicles. So basically, they’re stealing the vehicles. They sold the vehicles to the same person. Fraudulent repair orders were used to complete lien sales for these vehicles, even though work was never done. Falsified title requests were sent to the DMV to get a title. Vehicles were personally used by one of the people; they sold them to one person, and he owned a dealership.

Using a Mechanic’s Lien for Legitimate Titles
So the way it works is a mechanic’s lien is a powerful tool, but because it’s so powerful and it’s a loophole, it will be scrutinized more than any other type of paperwork. So if you’re thinking about using a mechanic’s lien to get a title, just make sure that it’s actually what happened, and what happened is somebody brought a car into a shop for repairs, you have a signed repair order, and they didn’t pay the bill. Now, if you have a vehicle you need to get a title for, and you’re thinking that’s the method, you have other ways that’ll work better: court order title, bonded title, prior owner contact all these methods. You’ll find them on our website, and they’re actually easier than a mechanic’s lien.

Mechanic’s Lien Process Is Complicated
With a mechanic’s lien, you have to send out all kinds of notices, you have to do auctions, you have to do affidavits, you have to do more work than any other title method, and it’s probably not going to work because they’re going to scrutinize it and audit it.

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How Digital Car Titles Are Doing

Making Vehicle Titles Electronic: Our State-by-State Approach
So many of you have asked how exactly we are working on getting vehicle titles easier to obtain so they’re not, you know, paper documents old school and they’re more electronic. Well, as part of the eART Coalition, we are working state by state tirelessly to get states to adopt electronic titles. And here’s an example of how that works. This is a directive we’re working on with the state of Massachusetts, and here are all the gatekeepers and stakeholders that are working on this. Here’s us right here Car Titles, you see.

Stakeholders Involved
And you also have ADESA, one of the largest auto auctions. You have TRAR, which is a major automotive company. You have Copart, which is a salvage auction. A lot of major players in the automotive and document industry, and we put together a project with each state based on what their rules are. This particular inquiry went directly to the lieutenant governor of Massachusetts, and it says under signatories: “We would like to request your support in directing the Registry of Motor Vehicles…”

The Role of RMV
The RMV that’s what they call it in Massachusetts, the Registry, not the Department to adopt necessary rules or policies to facilitate the acceptance of electronic signatures on all documents required to complete motor vehicle title transactions. It’s really simple. And then we put the supporting information; we put all the different benefits.

State-Specific Title Processes
It’s tedious because we have to do it one state at a time. It’s not like there’s a national title system; every state has a separate vehicle title process. So this is how we do it: we go through the state’s rules and regulations, find out who handles it, put together a package for them, and also offer support.

Third-Party Involvement
As they’re doing this, they might need programming, they might need knowledge of other states, they might need information from third-party vendors like the companies you see on this list. All of those companies are involved with the title process, and the states want to make sure that third-party vendors are also part of the solution. So each of us is committed as a company to providing support for the state to be able to do this, but also to make it easy for them to do it so that there’s no friction in this changeover.

Success in the Works
So this is how we’re working on it. It’s happening behind the scenes. It may take a few years to have this all done, but we’re doing it one state at a time. It’s been very successful. As you probably remember from previous reading, the state of California put a lot of their titles on the blockchain, which is a great start. And other states are doing the same thing. We will not stop until we make it easier for consumers to get titles for vehicles because we know how hard it is.

The Goal for Consumers
We know what kind of problems you have getting titles for vehicles. At the moment, we try to make it easier by being able to do the paperwork for you if you want, but in the long run, we want to make it easier for everybody so you don’t need to have that kind of professional assistance just to get a title for a car. Because if it’s your car, you’re supposed to have a title.

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The Difference Between A Lien And A Title For A Vehicle

Title vs. Lien
In the course of determining ownership of a vehicle, the phrase “title versus lien” often comes up in conversation. So what is the difference between a title of a vehicle and a lien on a vehicle? Well, a vehicle title is a certificate a legal government document that looks like this that is issued by a government agency. In most states, that agency is called the Department of Motor Vehicles or Motor Vehicle Department. Sometimes it’s called the Department of Transportation. Some states have a different name like Secretary of State.

State Agencies and Titles
Either way, every state has a government authority that issues titles. It’s not a document you can buy from a company. You can’t print one out from the internet, can’t download a document. It’s a physical document it’s kind of like a $100 bill, right? You can’t print a $100 bill from the internet.

What is a Lien?
What is a lien? Well, a lien is a claim against the title. So if you have a title for a vehicle and it has your name on it as the owner, if you borrowed money against that vehicle either when you purchased it or later on, there will be a section down here for lien holder where it’ll be filled in with the name of that lien holder. The lien holder puts their name on the title record to protect their interest, to make sure basically they get paid back, and make sure that you pay the notes on that car. In order for you to get that title document in your hands, you have to have that lien removed from the title record. That’s called a lien release.

Lien Release and Title Document
If the lien is showing on the title record, in most states the Department of Motor Vehicles cannot give you the title. In fact, the lien holder the bank, the lender is probably holding on to that paper certificate. And when you pay them their last payment, then they give that to you.

Lien Controversy: Failure to Notify DMV
So what is the big controversy about liens and lien releases? Well, here’s what happens. Many times when a lien is no longer active, whether it’s paid off, whether it’s a charge-off, a write-off, bankruptcy, or some other type of dissolution, the lien holder does not give any notice to the title authority, to the Department of Motor Vehicles.

Lien Holder Process
If you pay off the loan, all they’re going to do is take that title certificate they have in their file cabinet, stamp it paid, sign it, and mail it to you. They will not update the records at the Department of Motor Vehicles. As far as they’re concerned, there’s still a lien on the vehicle. The lender figures, well, you have the title, we signed it, so you’re good.

Cost of Filing Lien Releases
Why wouldn’t the lien holder just tell the DMV the lien is cleared? Well, here’s why: it costs money. In order to file a lien release, they have to pay a fee. It might only be $10 or $15 or $20, but imagine doing that a thousand times a day for all your customers. It’s $20,000 a day, it’s $100,000 a week, that’s $5 million a year. If they could save that money by not doing lien releases, that’s free money in their pocket.

Problems Without Lien Release
Plus now they have to have extra employees that do these filings, send them in. They’re saving a lot of money. So they figure they send you the title, it’s stamped paid, you’re good. Well, what happens if you lose that title? Well, then that’s a problem. Or what happens if another person buys that car and the title doesn’t go with it? That’s a problem because now, as far as the DMV is concerned, there’s still a lien showing.

Other Issues with Liens
What happens if you have a charge-off or a write-off? Well, the DMV definitely doesn’t hear about that. The lender is not going to tell them about a charge-off or a write-off, and that car is going to be encumbered it’s going to be blocked until that’s cleared.

How to Remove a Lien
So how do you get the lien removed? Well, there are only two people in the entire world that can sign a document to remove that lien. One is the lien holder, the other is a magistrate or a judge. So here’s how you do it. First, send a lien release request package to the lien holder. Don’t try to do this by phone, don’t try to do it by email, don’t try to do it by any kind of message. Send a package.

Lien Release Package
Here’s an example of a lien release package. It’s got a bunch of documents in it put it all together: a lien release, a letter of non-interest, a declaration, an affidavit. Four documents. Send it by mail to the lien holder. Don’t email it, don’t scan it, don’t text message it put it on a piece of paper.

Why Mailing is Important
Here’s why: that lien holder company, and you’ve heard us say this before, does not have a team of people. They do not have a department of people sitting around waiting to do lien releases for people. Everybody in that company has another job, they’re working on some other task.

Making it Easier for the Lien Holder
So if you just call them up and say, “Hey, give me a lien release,” yeah sure, whatever. They have other jobs to do. They’re not going to go find—think about how long it takes to find these papers. In fact, when we do lien releases for customers, half the job is finding all the right forms, not so much filling them in it’s finding the right ones.

Facilitating the Process
The lien holder is definitely not going to do it. So if you want to do it for them, that will get it done faster. Get all the right documents and then fill them in. Put the VIN number, your name, your address, all the details so they don’t have to do any work.

The Importance of Minimizing Their Effort
Because as soon as that lien holder has to do any kind of work, they’re going to just forget it. They might tell you they’ll do it, but they never will. Sometimes they’ll even tell you, “We’re not doing this.” You want to mail it to the lien holder, and when you mail it to them, go the extra step. Put a return envelope in that mailer that’s what we do. Put a return envelope already filled out with your name and address and a stamp.

Ensuring Smooth Processing
So literally that employee at the lien company, all they have to do is sign it, put it in the envelope there’s already a stamp put it out in the mail. They don’t have to do any work. They don’t have to find an envelope, find a stamp, go to the mailroom, anything. As soon as they have to do any kind of work, they’re just going to forget about the whole thing.

Dealing with Complex Cases
Also, if there’s any kind of gray area about that lien if it’s a charge-off, if it’s a write-off if they can just pull it up in the system, they type in your VIN number, oh, write-off, sign it, boom, send it. If they have to do research, find documents, that might keep them from giving you your lien release.

Lien and Title: Final Clarification
So remember, a lien and a title are two different things. A lien is a claim against the title. A title is the ownership of the vehicle. Also, a very common misconception if you borrow money from a bank to buy a car, they’re not the owner of the car, you are the legal owner. They’re just a lien holder, they have a claim against it, but the car is yours. You own it.

Court Process for Lien Release
As soon as you get that lien released, whether it’s through bankruptcy, charge-off, write-off, or signed release, that car is yours. Now what happens if you mail the package to the lien holder and they don’t reply, they don’t respond? Well then, what you can do is file a petition to the court in the county where you reside. It’s called a court-ordered title.

Court-Ordered Title
You’re asking the court to declare you to be the owner of the vehicle free and clear based on a court order. You have to show them, “Look, I reached out to the lien holder in writing, they refused to comply, they didn’t object to it, they didn’t come get the vehicle, they didn’t do anything, so they’re abandoning the vehicle to me. I want you, the court, to make me the owner.” And then they can sign the lien release. If they sign it, it’s as good as gold.

Conclusion: Lien and Title Differences
Those are the differences between the two. Don’t confuse lien and title two different things. If you have a vehicle that has a lien on the title record, you have to clear that up first before you get a title, even if it’s not your lien, even if it’s somebody else’s.

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Can You Get A Kentucky Red Title

Kentucky Red Titles
So what is a Kentucky red title? We get a lot of calls from people who are looking to get a title for a vehicle, and what they’ve obtained from the last owner is a Kentucky red title or maybe they didn’t even get it; they just found out that’s what’s on it. Here’s what happens: If a vehicle has been declared a parts-only vehicle or non-repairable vehicle, most states don’t give anything for it. They might give you a title that says “non-repairable,” they might give you a “junk title” or “parts-only title.” In Kentucky, they give you a document that just says “title,” but it doesn’t say “parts only,” it doesn’t say “non-repairable” it just says “Kentucky title,” and it’s red.

Eligibility and Restrictions
The problem is that vehicle is not eligible for title or registration in any state. It’s been declared a parts-only, non-repairable vehicle, and federal law doesn’t allow it to be titled in any state. But Kentucky gave this document for ownership just to prove ownership. A really good description of this comes from the Tennessee Department of Revenue, and the reason Tennessee has this on their website is because Tennessee is right next to Kentucky, so a lot of people try to go from Kentucky to Tennessee with these vehicles to get them on the road.

Tennessee’s Stance on Kentucky Red Titles
What does Tennessee say? They say that a Kentucky red title is the equivalent of a non-repairable certificate. Vehicles that are issued Kentucky red titles or Tennessee non-repairable titles are damaged beyond repair and would not meet Federal Motor Vehicle Safety Standards for road operation. A vehicle that is issued a Kentucky red title may not be registered in Tennessee. This is the same as every other state that doesn’t give out titles or registrations for these vehicles.

Warnings and Buyer Caution
So, if somebody’s trying to sell you a Kentucky red title, be very wary. And also, if you’re not a resident of Kentucky, you can’t put it on the road because it’s not allowed to be driven they consider the condition to be poor. Now, you may say, “Hey, my car is fine, there’s nothing wrong with it.” That doesn’t matter. At some point in its history, an insurance company decided they don’t want this car back on the road for whatever reason, and it doesn’t matter what their reason was. It may just have been that they just don’t want it for liability reasons.

Final Thoughts and Precautions
So, that car is not eligible to get a title. Beware of Kentucky red titles; they’re the same as a non-repairable, junk, parts-only, or certificate of destruction. Every state calls it something different, so don’t try to buy one unless you’re 100% sure that you can take it apart and get money back from selling the parts.

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What Are The Easy States To Get A Vehicle Title?

Car Registration Challenges
The Question About State Registration
The question comes up quite a bit: what is the best state to register and title your car in? A lot of people ask what’s the easiest state that I can use to title my car. If you have a vehicle you’ve purchased without a title and you’re running into problems in your state, many times the instinct is to try to pick another state to use to title or register your car. At first, this might seem like a good idea.

Misconceptions About State Difficulty
The problem is a lot of people think, “Oh, my state’s really hard. My state’s the hardest state to title a car.” The only reason that they have that opinion is because it’s really the only state they’ve had any experience with. Most people have never tried to title or register a car in another state. They may have heard things through the grapevine or on some web forum or social media that other states are easy. They might have heard about loopholes regarding Vermont or Montana or other states.

Understanding the Source of Title Rules
Here’s the problem: every state has rules about how to get a title and registration. Guess where those rules come from? They come from the federal government. Even though titles and registrations (certificates like this) are issued by the state, it’s not the state that makes up the rules they’re just the ones who enforce and execute the rules. The rules come from the federal government, and all states have to abide by the rules. All states use the same criteria.

Options for Obtaining a Title
The most basic one is that in order to get a new title for a vehicle, you’re supposed to have the old title signed over to you, or a couple of other options. Some states allow you to do a bonded title with a surety bond. Some states allow you to do a court order title. But no states allow you to do a title with just a bill of sale.

You might say, “Well, I heard Vermont did a bill of sale.” Vermont used to do a registration with a bill of sale they didn’t give you a title, they gave you a license plate. So no states ever gave titles with a bill of sale because federal law doesn’t allow it.

Reasons for Using Loopholes
So why are people using loopholes? For the most part, the reason that people use loopholes is to try to avoid and evade other things like taxes. The reason people use Montana LLCs is to do tax evasion. If you register or title a car in Montana, you don’t have to pay sales tax, so that could save you a lot of money.

Issues with Nonresident Titles
The problem is, if you are a resident of, let’s say, California, and you decide “I’m going to go to Montana and register my car there so I don’t pay tax,” two things are going to happen. First, no state is allowed to give a title to a person who is a nonresident. So if you’re not a resident your driver’s license is not from Montana they’re not going to give you a title.

What people do is they form an LLC. They form a corporation in Montana, put the title in the corporation name, and then drive around with a Montana license plate. First, you have to form that corporation, which is not that hard to do and doesn’t cost that much maybe $300-400.

Risks of Driving with Out-of-State Plates
The problem is, whatever state you’re driving in California, Texas, Illinois, New York, whatever you’re driving around with your car with a Montana license plate. Now, there’s no law against driving it in another state, but states that are notorious for tax evasion, like Montana, that license plate is going to stick out like a sore thumb.

There are what’s called ALPRs (Automated License Plate Readers) all over the country. They’re on police cars, they’re on tow trucks, they’re in parking lots, they’re on street signs that read every plate that goes by and run plates. If it sees a Montana plate, it’s going to run that plate, and if it sees it comes back to an LLC, that’s a red flag.

Consequences of LLC Registrations
They’re going to look at the name on the LLC, and if that name is a resident of the state, there are counties right now in New York and California and other states as well that are actively searching for Montana license plates. They back-search the corporation, they find the name, and they look to see if you’re a resident of their state.

Even if they don’t find that, if they see the same license plate go past that ALPR reader at a certain parking lot, a certain street sign, a certain intersection every day on your way to work, they’re going to pull you over. If they see you driving with a California license and a Montana license plate, they’re going to refer you to in California it’s called the Franchise Tax Board. Every state has a taxing authority that collects sales tax.

Increased Scrutiny from Authorities
They’re going to refer you for an investigation, and people are being fined. Some people are even having criminal records because of this.

What’s another reason you might want to go out of state? Well, because maybe your car won’t pass inspection in your state. Maybe your state has smog inspection or safety inspection, and your car is not going to pass. If you register a car in another state to avoid inspection, the same thing’s going to happen it’s going to be found out, and your car will be impounded because it’s not safe for the road.

Insurance Challenges with Out-of-State Registration
Another big problem with an out-of-state loophole is insurance. When you go to your insurance agent to purchase an insurance policy for your vehicle, you have to tell them what’s called a garaging address. That doesn’t mean you have to have a garage where you park your car it just means you have to tell them where your car is most of the time.

So let’s say if you do a Montana LLC, where are you going to tell them the garaging address is? If you tell them it’s in Montana, that matches the LLC okay, great, here’s your policy. But if you’re driving around in Illinois all the time and, God forbid, something happens to your car it’s in an accident, it injures somebody, it’s stolen, it’s damaged, even if somebody else crashes into you and it’s their fault they’re going to look at the garaging address.

The Importance of Accurate Garaging Address
They’ll say, “Your car is not supposed to be in Illinois all the time it’s supposed to be in Montana. What were you doing in Illinois? Your driver’s license is Illinois, your employment is Illinois, why were you in Illinois?” You can’t just say, “Well, I was just here on the weekend.” They’re going to ask you to prove it show records where that car was in Montana or they’re going to deny your claim, and you’re out that money.

Potential Claim Denials
Or you can give them your address in Illinois where you live on your policy, and then they’re going to ask you, “Well, why are you titling it in Montana? What’s the reason for it?” They might not insure your vehicle because it doesn’t match it’s what’s called fraudulent jurisdiction. They’re going to think that there’s higher risk involved with that policy because you’re titling in one place, registering in another place, living in a third place it’s not going to match up. So insurance is going to be another problem that most people don’t think about.

The Easiest State to Title Your Car
Now, what’s the easiest state? The easiest state is the state you live in, because all the states have the same rules for titling and registration. Every state has a method you could use to get a title, whether it’s a bonded title, court order title, VIN verification, or prior owner contact there are many methods you could use. All of those methods are easier, cheaper, and faster than going to some out-of-state place. They always are easier, cheaper, and faster.

Considerations for Out-of-State Titles
So don’t feel like you have to go out of state to get a title. It’s not going to save you any money, and it’s going to take longer because you have to deal with the other state. Even if you decide to do it, at some point there may be liability because of taxes, insurance, or other factors.

Some people just feel like they have to go out of state because they want to feel like they’re getting away with something. That’s fine, but just realize that your personal interest in getting away with something is going to cost you time, money, and everything else.

The Good News
The good news is this: getting a title is not that hard. If you walk into the DMV without a title and say “give me a title,” they’re going to tell you they can’t help you because they don’t have the information they need. But there are legitimate methods available in every state to obtain a proper title for your vehicle.

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