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Pay your car loan---or go to jail
reprinted from "The System Connection" a publication of the Arizona Credit Union System
Vol 6 Number 6, January 1999
By Howard Chorost
Effective September 30, 1998 secured creditors in Arizona now have a new tool in their arsenal
against debtors who have defalted on their car loan payments.
A.R.S. 13-1813 provides creditors with the ability to enlist the aid of law enforcement officers in the
event of a severe delinquency where the debitor has hidden the vehicle or has otherwise made
it unavailable for repossession.
To take advantage of this new law, credit unions will have to revise their loan documentation
to conform to certain statutory requirements. Once these requirements have been met, in the
event a car loan is delinquent for ninety days, the statute authorizes a creditor to send a
notice by certified mail to the debtor stating that unless the vehicle is surrendered within
thirty days, the debtor will be subject to criminal prosecution and the vehicle will be
classified as stolen for purposes of the Arizona Motor Vehicle code.
The new law, which is a criminal statute, classifies the offense of failing to comply with the new
Notice to Surrender as a Class 6 Felony, carrying a maximum penality of imprisonment for one year.
It is unclear the effect this new criminal statute will have on bankruptcy cases. However,
it is anticipated that this statute will be heavily litigated both in State court and in the
Bankruptcy courts.
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