My lender has secured my car in place of my bad debt but it's worth more than the debt. Does he owe me a refund?

When you provide secured property for bad debt and are unable to pay back the amount that is left on the loan, you owe that amount to the lender.  It is preferable if both sides are able to work out a payment plan to pay back the remaining debt, but if you are unable or unwilling to pay back the remaining amount, the lender may try to secure the bad debt by seizing your property.  One of the most common seizures of property is the borrower’s car. 

Personal property, as opposed to real property, is used to secure a bad debt.  Your car is one example of personal property.  Depending upon the specific rules of the jurisdiction in which you live, the lender may be able to secure your car as collateral for the amount of the unpaid loan.  However, if the car is worth more than the amount remaining on the loan, the lender must return the difference back to you.

The lender will secure your property at the outset of when you obtain the bad debt via a contractual lien or a “Purchase Money Security Interest” (PMSI) in the items purchased with the funds obtained from the lender.  This is to better insure that the collateral is secured before any possible borrower default.  However, if the lender does not do this beforehand, he/she may secure property after default via a statutory of judgment lien.

Talk to a debt settlement attorney for a case review and for attaining legal advice regarding your options under debt settlement laws.