Selling a car you still owe money on can feel risky. You might worry about criminal charges or jail time in case you sell the car without telling the buyer a lien exists.
The good news is that in most states, this is a civil matter. You will probably not go to jail.
However, it is illegal to sell a car with a lien on your car title without telling the buyer. If you hide the lien, the buyer can sue you under consumer protection laws. In Texas, you could face a state jail felony with up to 2 years in prison.
Disclaimer: This information depends on your local and state laws. Laws may change, so always verify details with official state or local government sources.
Key Takeaways
- Selling a car with a lien without telling the buyer is illegal, but in most states you will not go to jail. It is a civil matter.
- Texas, Florida, and Oklahoma have criminal penalties for hiding a lien from the buyer. Texas is strictest with up to 2 years in prison.
- Hiding the lien is illegal and violates state consumer protection laws in all 50 states.
- Even without jail time, you can be sued for the full purchase price plus double or triple damages.
- Already sold without disclosing? Consult a consumer protection attorney about your liability and options.
- Selling a car with a lien is legal if you disclose it to the buyer and pay off the lienholder at closing.
Can You Go to Jail? It Depends on Your State
In most states, no. The buyer can sue you, but you will not go to jail. Selling a car with a lien is usually treated as a civil matter, not a criminal one.
States With Criminal Penalties
In Texas, fraudulent transfer of a motor vehicle is a state jail felony punishable by up to 2 years in prison.
In Florida, it can be a 3rd degree felony with up to 5 years in prison.
Oklahoma treats it as a misdemeanor or felony depending on the amount involved.
| State | Type | Jail Possible? | Max Penalty |
| Texas | State Jail Felony | Yes, up to 2 years | $10,000 fine |
| Florida | 3rd Degree Felony | Yes, up to 5 years | $5,000 fine |
| Oklahoma | Misdemeanor/Felony | Yes, varies | Varies |
| California | Civil (usually) | No | Lawsuit damages |
| Most other states | Civil | No | Lawsuit damages |
Contact your state Attorney General’s consumer protection office if you are unsure about your state’s laws.
If you have already sold a vehicle without disclosing the lien, consult a consumer protection attorney to understand your options.
Good to Know: Selling a car with a lien is legal if you disclose it. Tell the buyer about the lien and make sure the lienholder gets paid at closing.
Many people sell liened cars every day without any legal trouble.
Is It Illegal to Sell a Car With a Lien Without Telling the Buyer?
Yes, it is illegal in all 50 states. However, how it is handled depends on where you live.
Texas, Florida, and Oklahoma have criminal penalties for hiding a lien. See the table above for details.
In most other states like California, Georgia, New York, and Illinois, you will not go to jail. These states treat it as a civil matter where the buyer sues you for damages.
Depending on the car’s value, you could owe $10,000 to $50,000 or more. This includes the purchase price, attorney fees, and double or triple damages under state consumer protection laws.
What Makes It Criminal vs Civil
The difference comes down to intent. If you made an honest mistake, it stays civil. If you intentionally hid the lien to deceive the buyer, it can become criminal fraud.
When Selling a Liened Car Is Legal:
- You tell the buyer about the lien before agreeing on a sale
- You arrange to pay off the lien at closing so the buyer gets a clear title
- You get written authorization from the lienholder to transfer the vehicle
- The buyer agrees to assume the loan with the lender’s approval
When Selling a Liened Car Is Illegal:
- You sell the car without telling the buyer a lien exists
- You take the buyer’s money but do not pay off the lienholder
- You forge documents or lie about the title status
- You transfer the car without the lienholder’s authorization
What Happens If You Sell Without Disclosing the Lien
Even if you avoid jail, there are serious consequences for both parties:
For the Seller
- You remain responsible for the loan and your credit drops if you stop paying
- The lender may pursue a deficiency judgment against you
For the Buyer
- The lender can repossess the car at any time
- The buyer cannot get a clear title or sell the vehicle until the lien is paid
How to Legally Sell a Car With a Lien
You can sell a car with a lien without any legal trouble. The key is disclosure and paying off the debt at closing. Here are the essential steps:
Get a payoff amount in writing from your lender before listing the car.
Tell the buyer about the lien and show them what you owe before agreeing on a price.
Use the buyer’s payment to pay off the loan, then get a lien release from your lender.
Transfer the clean title to the buyer at the DMV once the lien is released.
Frequently Asked Questions
Is It Illegal to Sell a Car With a Lien?
It depends on how you do it. Selling a car with a lien is legal if you disclose the lien to the buyer before the sale and ensure the lienholder gets paid.
It is illegal to sell a car with a lien without telling the buyer. This violates consumer protection laws in every state.
Can the Buyer Sue Me for Selling a Car With a Lien?
Yes. If you did not disclose the lien, the buyer can sue you for the purchase price, lien removal costs, attorney fees, and possibly double or triple damages under consumer protection laws.
What If I Did Not Know About the Lien?
Honest mistakes happen. Liens sometimes stay on titles after payoff due to paperwork delays.
If you did not know about the lien, you may have a defense against fraud charges.
However, you are still responsible for resolving the situation with the buyer. Check for liens on any vehicle using the VIN before selling.
Can the Lender Come After the Buyer?
Yes. The lien follows the car, not the person. The lender can repossess the vehicle from whoever has it, including an innocent buyer. The buyer’s only protection is to sue you for their losses.
How Long Does a Lien Stay on a Car Title?
A lien stays on the title until the debt is paid in full and the lender files a release.
Some states automatically remove liens after a certain period, but most require the lender to submit paperwork. Learn more about how to remove a lien from your car title.
How Do I Know If a Car I’m About to Buy Has a Lien?
Run a VIN check before buying any used car. You can check for liens on a vehicle through the NMVTIS database, your state DMV, or services like Carfax and AutoCheck.
Always ask the seller to show you the title and verify no liens are listed.
What Should I Do If Someone Sold Me a Car With a Lien?
Contact the seller immediately and demand they pay off the lien. If they refuse, consult an auto dealer fraud lawyer or consumer protection attorney.
You can file a lawsuit to recover your money plus damages. In some cases, you may also report the seller to law enforcement for fraud. Get free legal help if you cannot afford an attorney.
Can I Trade In a Car With a Lien to a Dealership?
Yes. Dealerships handle liened vehicles every day. They contact your lender directly, pay off the loan, and handle all the paperwork.
If your car has negative equity, the dealer will typically roll it into your new loan. This is often the easiest way to sell a car with a lien, since the dealer handles the process.
Can a Dealer Sell Me a Car With an Undisclosed Lien?
No. Dealers are legally required to disclose all known liens before completing a sale. If a dealer sells you a car with an undisclosed lien, they have violated Federal Trade Commission rules and state consumer protection laws.
You can file a complaint with your state Attorney General and sue for damages.
What Can I Do If a Dealer Sold Me a Car With a Lien?
Contact the dealership first and demand they resolve it. If they refuse, file a complaint with your state Attorney General’s consumer protection office. You can also sue the dealer for the purchase price, costs to clear the lien, attorney fees, and statutory damages.
Dealers face stricter penalties than private sellers for this type of fraud.
Need Cash but Have a Lien on Your Car?
Montana Capital offers title loans for cars with existing liens. Check if you are eligible for free with no obligation.
Call us or apply online 24/7.
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