Mechanics Liens & Bank Lien Releases For Car Titles

Welcome to another episode at car titles.com. One of the most common questions that comes to us has to do with vehicle liens. It could be removing a lien from a vehicle title record, for example, an old paid off car loan or a charged off car loan or a loan that shouldn’t even be on the car.

Common Lien Questions
Another lien question that comes up is a mechanics lien. Can you use a mechanics lien to get a title? There are some very important misconceptions that people have that at the very least could keep you from getting a title and have you be rejected on your title transfer. At the worst, it could create legal problems. Look, most people don’t intend to do anything illegal or get in trouble, but a lot of times there are urban legends or online forums that tell you you can do certain things that might end up getting you into trouble.

Vehicle Liens and Titles
So let’s first talk about a vehicle lien and a vehicle title with a lien on the record and figure out what that is. First of all, a vehicle title, as you know, is a legal document. Here’s what it looks like. This is a title for a vehicle, and it’s a certificate that’s issued by a government agency. Most states call it the Department of Motor Vehicles or DMV, something like that, and that state agency keeps track of and issues vehicle titles.

Lien on Vehicle Titles
Now, if you purchase that vehicle and when you bought it, you got a car loan from either the dealership, a manufacturer, or a bank or somebody like that. Let’s say you got a car loan from Chase or from Toyota Motor Credit. That lender is going to put that lien record on your official title history. It’s going to go into the government agency record system so that your title will say right on it, lien: Toyota Motor Credit. In fact, in most cases, they won’t even give you the title because that’s being held by the lien holder in most states. So as long as that lien is on the record, you can’t sell it, transfer it; sometimes you can’t even get the title because the bank owns it.

Removing a Paid-Off or Charged-Off Lien
Well, what happens when you pay that off or it’s a charge off and now you have to get it removed from the title record? Well, in most cases, let me back up, in some cases, the bank or the lien holder will actually take action to remove that lien from the title record. They’ll either send a document, they’ll do it electronically, or they’ll sign an affidavit that the DMV will use to take it off the title. Sometimes they give that document to you and then leave it up to you to remove it from the title. Sometimes all they’ll do is they’ll take that title certificate, sign it, stamp it paid, and send it to you, but they’ll never clear it off the title record. That’s a problem because if you lose that one single piece of paper, now you’re out of luck.

Process of Removing a Lien
So how do you take it off? Well, in almost every state, the process goes like this. Some lenders have a direct electronic connection to the official DMV records where they can electronically type it in, hit enter, and it clears it. Sometimes they require a piece of paper, and that’s more common. That piece of paper is called a lien release document. It’s an official form from the DMV that releases that lien from the title record, which clears your title, and now you can sell it, trade it, do whatever you want.

Obtaining a Lien Release Document
How do you get one of those? Well, we’ve talked about it before, and don’t forget, in a minute, we’re going to talk about mechanics liens and what that means and how to do a mechanics lien if you can because the mechanics lien can also result in a bank loan being removed from a title, right? That can happen. So how do you get a lien release? Well, the first thing you do is you see if you already have it from the lien holder. If you don’t have it, you need to get it from the lien holder. The lien holder, bank, financial institution, whoever, they have to sign that form. You can’t just print it out yourself and submit it. It has to be signed by somebody who’s verified from the lender.

Contacting the Lien Holder
So what we recommend is don’t just call up your bank and say, “Hey, give me a lien release.” Don’t email them, don’t fax them, don’t text them, don’t send them a Facebook message because in most cases, that ain’t gonna work. The bank is either gonna forget about it, they won’t do it, the whoever you talk to on the phone, that’s not their job, and it’ll get lost in the shuffle, fall through the cracks. So what should you do? What you should do is you get that document, that form, print it out. It’s a one-page form. Fill everything in you can. What you can’t do is you can’t sign it. Mail it to the lien holder with a little arrow sticker saying, “Hey, sign here.”

Proper Procedure for Lien Release
We’ve talked about this before, but we’ll go through this again. Put a return envelope so that they have a place to send it back to. They don’t have to do any work. Put a stamp on that envelope to mail it back to you. That way, somebody gets it, all they literally have to do is sign it, lick the envelope, boom, it goes back to you. If they have to do any more work than that, it’s possible and likely that that employee at that bank, at that financial institution, is just going to say, “Well, maybe I’ll do it later, maybe I’ll throw it away, or maybe I’ll pass the buck to somebody else because I don’t feel like doing it,” because all these people are doing some other job. They’re not a lien release department just sitting around waiting to do this.

Handling Charge-Offs
What about a charge off? Well, if you do that same thing, many times what happens is that employee pulls it up, they get the VIN number, they type it in, “Yep, charge off, sign it, send it back,” now your lien is released because the charge off technically means it’s off their books, so it should be released. They’re not going to take it off the DMV record unless they have an easy way of doing it, so charge off takes it off.

Mailing Method and Cautions
In fact, one of the things you want to do, sometimes people ask us, “Well, should I send a certified mail?” Don’t send a certified mail because that’s going to probably end up going to the legal department of that lender, which means there may be higher scrutiny. It’s going to go to some higher level executive, higher scrutiny. If you just send a regular mail, it’ll go to some clerk, they look at it, charge off, yup, sign it, boom, you’re good. That’s how you do it. That’s how we do it. We send out a couple hundred of these a week for clients. That’s how you do it.

Mechanics Liens Overview
Now, what about a mechanics lien? Change the subject, change gears. Well, a mechanics lien, for those who don’t know, most of you do who watch our channel, is a process where a licensed garage, repair shop, storage yard can file a lien on a vehicle that’s been brought in for repairs, brought in for towing, brought in for storage, and somebody didn’t pay the bill. And that mechanics lien allows them to sell the car to pay the bill, right? And it also clears off any prior liens, even if those liens aren’t paid. So if there’s a lien that’s paid that’s still open with Toyota Motor Credit, somebody owes ten thousand. If the mechanic does it the right way, it removes that.

Fraud in Mechanics Liens
However, here’s the thing. There’s a lot of fraud that goes on with that, and it’s not something which the powers that be don’t know about. In fact, here, look on the screen. This is from the AAMVA, American Association of Motor Vehicle Administrators. This is the quasi-government authority. A lot of law enforcement works in this organization that works with the DMVs to prevent fraud, and that’s exactly what this is: prevention of an abandoned vehicle, a mechanics lien fraud. Look, they’re not stupid. They know that some auto repair shops will file fake mechanics liens. Why would they do that? Well, what if your buddy owns a body shop and you say, “Hey man, I got this 2020 Toyota Camry I owe $15,000 on. I don’t want to pay my loan anymore, so do this: file a fake mechanics lien, sell it back to me, I’ll give you a couple hundred bucks, and then I get a free car. I don’t have to pay my loan.” Well, on paper that all sounds good, and the auto shop can file the right paperwork, they can do everything and try to get you a clear title, but here’s what’s going to happen.

Best Practices and Identifying Fraud
Look, this best practices for preventing fraud, this came out in March 2020. That’s more than three years ago. They’ve been on to this for a while. What they’re going to do anytime a mechanics lien shows up at a DMV, they’re going to look and see if any of it fits this profile of mechanics lien fraud because they know this happens and the banks are on to this too. A lot of times people will try to send, because one of the steps you have to do for a mechanics lien is send a notice to the bank and prove that you sent them a notice. A lot of these scammers will put a letter to the bank with blank paper in it so they don’t really get a notice, but they can show certified mail, “Look, we mailed it to them, they signed for it.” Well, that ain’t going to work because they’re onto that. So the mechanics lien fraud is something you don’t want to get caught up in because even if you file the paperwork and you get your title clear, if they come after you, look at this: evidence of crime rings using mechanics lien fraud. Do you want to be part of that? Do you want to be part of a crime ring, even though you’re not trying to do that?

Legal Implications
If your name shows up on the title and you get caught with a fake mechanics lien, you may get pulled into this. So it’s not something you want to do. So I know we get questions, “Hey, can we use a mechanics lien for that?” The answer is, technically, can you? Yeah, you could file the paperwork, but I wouldn’t recommend doing that because they’re onto it. It’s something which is more common than you think. Look, every year millions of titles change hands in the US, millions. Every week there’s probably 20 or 30 mechanics liens done in some states. Well, they’re not stupid. They know what’s happening. So do the lien release if you can. If not, there’s other ways to get a title and it’s not something which is recommended to do.

Contact Information and Support
If you have questions, give us a call. We’re glad to help. We can walk you through the proper ways of getting a title, how to remove a lien, what to do with a charged off lien, how to get the paperwork signed. And by the way, if you have a lien from a bank that went out of business, right, we get this all the time. “Hey, what if a lien holder went out of business?” Same thing. You get that document, fill it out, and you send it to the successor, and we can help you find who that is. If it was from back in the financial crisis of 2008, a lot of banks went out of business. If you need help, give us a call. We’re glad to help you with any vehicle lien questions or title problems you have, and we can give you the right answer for how to do it and not get in trouble.

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