Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy

Unpaid Trade-In’s, Missing Cars, Unpaid Bills– Impact on Lenders and Repossessors

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For a few days now, but now its official, Tricolor Auto Group (TAG), the seventh largest independent used car retailing chain in the U.S. has filed for bankruptcy. With operations all across Texas, Arizona, and California, this company catered heavily to subprime and customers with little-to-no credit history as well as undocumented persons. With new loans, titles, trade-ins, unpaid repossession fees and stored repossessed collateral in a flux, this could have major ramifications for many lenders and repossession agencies.

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The Lock Out

If anyone is having trouble getting repossession fees paid, getting trade in’s paid off or titles perfected by TAG, there’s a good reason. Last week, Tricolor Auto Group placed 80-90% of its workforce on temporary leave and suspending operations across Texas, Arizona, and California.

Employees effected by this operational halt were told that they would receive updates about potential reinstatement by early October. However, sources close to the matter explained that rather than bringing employees back, the company is expected to implement permanent layoffs

In addition to the layoffs, company systems were disabled, and payroll was suspended during what management described as an internal review process. At this point, the rumors of bankruptcy began.

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The Bankruptcy

On Wednesday the 10^th of September, multiple news sources report that Tricolor Auto Group filed a Chapter 7 petition claiming liabilities between $1 billion and $10 billion and assets in the same range. Unlike Chapter 11 bankruptcies, Chapter 7 is typically used by individuals, not companies, that are unable to restructure their debt and who agree to have their assets liquidated by a court-appointed liquidator.

The filing listed 25,000 creditors, including JPMorgan Chase & Co., Fifth Third Bancorp and Barclays. While not listed as large enough for news, there will be probably hundreds of smaller vendors, lenders and consumers who are owed for services, such as repossessions and transports, as well as consumers and lenders who are waiting for trade-in payoffs and consumers who are waiting for titles.

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No Turnaround

According to one source, company leadership had previously been engaged in high-level discussions about business expansion and potential lending partnerships as recently as three weeks ago. Unfortunately, those efforts were abruptly discontinued, with senior stakeholders indicating that there was no interest in continuing turnaround efforts.

The same source indicated that the bankruptcy decision followed the discovery of significant financial complications within the company’s lending operations, though specific details about the nature of these issues are unverifiable at this time.While no official statement had been made at that time, it had been rumored that TAG may file for bankruptcy on September 10^th, as it actually did occur.

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Impact on Lenders, Repossessors and Borrowers

The probable bankruptcy of the nation’s seventh largest independent used car retail chain doesn’t come without a dramatic rippling effect to all those who work for or are engaged in transaction with. A lot of people are going to be left waiting and lot of people are very likely to be very disappointed.

Deeply effected will be the lenders. Already mentioned were the big banks like JPMorgan Chase & Co., Fifth Third Bancorp and Barclays. But what isn’t mentioned are the many credit unions and community banks who have members who have traded in their cars and were waiting for payoffs.

Those cars may have already been sold again and the future lenders will not be getting their titles anytime soon.

There were reportedly many repossession companies who did work for Tricolor. Many were already having trouble getting paid. And many of these agencies will be lucky to get pennies on the dollar, if anything.

While all agencies should obviously cease repossessing their collateral, many of the agencies may already have cars on their lot. The automatic stay granted under bankruptcy protection prohibits the agency from doing anything with them. They can’t place liens on them and they can’t even charge for storage.

Any attempt to exert control over the collateral is illegal until allowed by a court order. When the trustee demands  the collateral to be released for liquidation, the agencies must obey the order. They have no right to demand storage, paid fees or anything.

For any borrowers in the flux between repossession and reinstatement, they too are in limbo. The agency will not release the vehicle until ordered to do so by the lender. With up to 90% of the staff laid off, this obviously is unlikely to happen anytime soon.

This mess could take months to years to straighten out.

Source: The Car Dealership Guy, The US Sun   

Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy

Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy – Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy – Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy

Huge Subprime Retail Dealership Chain Tricolor Auto Files for Bankruptcy – Repossession – Repossession Agency – Repossessor – Credit Union Collections – Credit Union Collectors – Lending – Bankruptcy