I suspect that the reduced payments permitted by Chapter 13 look like underpayments and delinquencies to the computer systems used by lenders. My guess is that payment in full per the confirmed Chapter 13 plan may not look like payment in full to the lenders’ computer systems.
Further, in the event that my clients’ Chapter 13 case gets dismissed after the last payment to the lender, there will be no discharge and presumably state law rights to collect delinquency payments and penalty interest rates would become available to the lenders.
I take the position that once the lender has been paid, it should release my client’s title even if the case has months or years to go. Any rights that the lender would have against my client would not change although the lender would not have possession of the title.
Georgia Code Section 40-3-56 provides that if any security interest or lien listed on a certificate of title is satisfied, the holder thereof shall, within ten days after demand, execute a release… The Georgia Code section does not contemplate bankruptcy but I would argue that payment in full under the plan constitutes a form of satisfaction per Georgia law.
In my experience, most lenders will consider releasing the title, especially if my client has been current with his plan payments and if the lender’s claim has been paid in full. I usually ask the lender to send the title to me so I will have proof of receipt and to avoid mail snafus. If my client has moved after filing, the likelihood of a delivery problem goes up.
Recovery of your title is yet another reason why all Chapter 13 debtors should monitor the progress of their cases.