Reader Question: Must the Lien Holder Apply Payment to the Intended Account

by Damien L.

I recently owned a vehicle of which I obtained a loan with my title as collateral. By doing so a lien was placed on the vehicle. This vehicle has since been in a collision and deemed a total loss by my insurer. The insurance company has sent me a confirmation stating that a payment has been issued to my lien holder yet my account with the lien holder does not reflect this.

Is the lien holder legally bound to apply this payment to the associated account and are there any reasons or circumstances in which the lien holder would hold the check and not cash it or apply it to the account? Is there any instrument of law I can use to compel the lien holder to apply the dispersed money to the account.

Thank you,


Staff Answer: Thank you for your question. The answer is short and simple: YES. The lien holder must apply the insurance company's check or payment to the associated account.

It would be helpful to know if the lien holder has given you a reason that your account is not reflecting the payment. Here are some questions that you may wish to pose:

Has there simply not been enough time for the insurance check to reach the lien holder?

Did the insurance company put an incorrect account number on the check (you mentioned in your email that the original lender has passed the loan on to another company), or was there no account number put on the check at all?

Do you have another account with the lien holder, and perhaps any incorrect posting is an honest mistake?

Perhaps most importantly: Does the insurance company record indicate that the check has been cashed? Or, in the case of an electronic payment, has the payment gone through?

It could be that by the time you re-contact the lien holder, the payment has since been posted to your account. We certainly hope that is the case. But if you suspect that the funds may have been misappropriated in any way, it might be time to consider consulting an attorney.

This question and answer have been approved for informational purposes only. It is not intended to take the place of competent local legal counsel.

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