A surety bond enables a person to claim ownership of a vehicle and register it when the title has been lost, stolen, or misplaced. The owner receives a bonded title for the duration of the bond period. The title is fully transferred to the owner when the bond period ends.

Let’s say you inherited your uncle’s car. The title is missing and was never in your name. You’re confident that you legally own the car, you’d even bet on that statement being true, but that isn’t good enough for the DMV. If only you could pay them to believe you…

A bonded title allows you to register the car as you normally would. Getting one requires a surety bond provided by a licensed surety lender. For a small fee (usually under $100), the lender promises to cover any losses in the event of someone else filing a claim of ownership, you attempting to register a stolen car, and other risks.

They would cover that loss with your money, of course, and that could add up to thousands of dollars. That’s why you should only get a surety bond for a car you can legally prove ownership of.

When Do You Need a Surety Bond?

There are only certain times that getting a surety bond makes sense. Mainly it’s due to the inability to establish ownership of a vehicle and correctly transfer the title. These situations include:

• Buying a car and not receiving the title during the purchase (like at an auction, estate sale, or inheritance)

• Purchasing a car and finding out that the title is assigned to the wrong person

• Buying a car with a normal title but losing it before it gets transferred

If you simply lost a title you already owned, that’s an easy fix that doesn’t require a surety bond. Notice the second bullet point: getting a bonded title is sometimes cheaper than fixing a damaged title by other means.

Steps to Obtaining a Surety Bond

• Ensure the vehicle has no liens, isn’t stolen, and isn’t “junk only” by running a VIN Check

• Contact the DMV and ask them to provide a cash value for your vehicle

• Find a licensed bond agency and purchase a surety bond

• Give the bond to the DMV in exchange for a bonded title

When you go to your DMV to receive a bonded title, they will require the surety bond from you. Most people don’t realize this until the DMV tells them it’s a requirement, so bring the documentation with you.

Before the DMV issues the bonded title, you will need to visit a third party to get a surety bond. You will be required to prove that the car isn’t stolen or part of an ongoing litigation, among other requirements.

At that point, you and the surety bond company have entered into a contract. There will be a time window allowing anyone else to file a claim for ownership of the car. Of course, they would have to legally prove ownership. At the end of that window, you can get a standard title and the bond will be lifted. Depending on your situation, you may have to file some additional paperwork to make that final transition happen.

If you want the process to go smoothly, make sure you have the following information ready:

• Your name exactly as it is stated on your driver’s license

• A current address

• Vehicle year, make and model

• The car’s VIN (Vehicle Identification Number)

• Vehicle value (often determined by the DMV in a letter)

• Binding evidence that you are the vehicle’s legal owner.

To avoid a potentially disastrous outcome, make sure you have solid legal grounds to claim ownership of a vehicle before you bond for the title. Run a VIN check to help gather enough evidence to support your claim of legal ownership.

How Do You Know What Value Surety Bond You Need?

Contact your state’s DMV to discuss getting a bonded title and they will tell you exactly how much of a surety bond you need. Then, they will guide you to a licensed agency that handles surety bonds in your area.

While some surety bonds are based on your credit, a lost title surety bond is based strictly on the value of your vehicle. Most states require your bond value to be 1.5 to 2 times the vehicle’s value as determined by the DMV. You will only be required to pay this if someone else makes a successful claim against your bond.

Once you have the surety bond, you are ready to go back to the DMV and apply for your bonded title using the steps above.

What is the Average Cost of a Surety Bond?

Many companies provide bonds for vehicles valued at $6,000 or less for just $100. This premium goes up once the value is above $6,000 and in certain states where more is required by law. If the value of the vehicle is more than $20,000, it’s likely that your application will need to undergo more extensive underwriting to confirm its validity.

You would only need to pay the entire amount of the bond if someone came forward who could prove legal ownership of the vehicle. If the only person who can do that is you, you won’t have a problem.

After Receiving a Bond, How Soon Do You Need to Apply for a Bonded Title?

While all states are different, many allow drivers to apply for a bonded title for one year from the date they issue the amount in the letter. If you choose not to get the surety bond within that time, you’ll have to get a new letter from the DMV.

How Long Does It Take to Receive a Bonded Title?

After purchasing your lost title bond, or surety bond, the company will mail it out to you within a few days. Once that’s received, you can head right to the DMV to apply for your bonded title. How fast you receive the title depends on your state and their typical processing time, but this can often take several weeks – it’s not an immediate process.

How Does Someone Make a Claim Against a Surety Bond?

During the process, the vehicle’s current listed owner will be notified of the bonded title. If someone believes themselves to be the legal owner of the car, they can file a claim against your bond. This claim implies that you intentionally violated the law and such claims taken very seriously by surety agencies and courts alike.

For a bond claim to have any grounds, someone would need to come forward claiming to be the true owner of the vehicle that you applied for a bonded title on. They would state that you shouldn’t have legal ownership of the vehicle and they may seek to receive damages for this. Surety bond claims cannot exceed the total value of the bond and can only be filed when the bond is active.

What Happens When a Surety Bond Claim is Successful?

Don’t be confused into thinking that the surety company is going to pay the claim for you; this isn’t insurance. If someone makes a successful claim against your surety bond, you are obligated to pay the full amount of the bond. Plain and simple.

To determine the validity of any claim, the surety bond company starts an investigation, often involving a court of law. Either they will find that the claim is invalid, and no further action will occur, or they will find validity in the complaint. At this point, you will either need to provide a valid defense to the claim or compensate the claimant for their damages.

Once the claim is resolved, the process ends. If you don’t provide defense or resolve the complaint, the surety company acts for you. Sometimes, they pay out on the suit, but then you face the legal costs involved in them hunting you down for the money. Either way, expect that you may also have to pay fees assessed by the surety company for providing mediation during the claim process.

Clearly, this is not the preferred outcome of a surety bond. To avoid this outcome, make sure you have solid legal grounds to claim ownership of a vehicle before you bond for the title. Getting a VIN check is a great place to start.

Alternatives to Getting a Bonded Title

Obviously, the best way to handle any car purchase is to make sure all the t’s are crossed and i’s are dotted properly from the start. Being able to transfer a valid title from a person’s name into your own smoothly is the ideal way to purchase any vehicle, and it’s the best way to avoid bad situations.

Most title issues can be fixed by simply filling out the appropriate paperwork at your local DMV – an incorrectly signed title, for example.

If you simply must get a bonded title, then you need to investigate the process of getting a bonded title and surety bond in your state. Each state has different requirements – some don’t even offer bonded titles at all. It’s your responsibility to do the research before moving forward. Make sure you also read all the paperwork provided by the surety bond company to learn what you are getting involved with, and have your attorney read the documents if you have any doubts.

We always suggest running a detailed VIN check before committing to buy a vehicle. Our service provides a variety of facts that will reveal an active lienholder and help you make the decision of whether or not to buy. If you find yourself needing a brand-new title, the specialists at Dirt Legal have obtained countess new titles for owners of cars, trucks, SUVs, dirt bikes, and just about anything with wheels. Click the links to learn more about our services.

We are not attorneys. This article is not legal advice. Cover image source