An automotive business expert breaks down the Tricolor bankruptcy

As the Department of Justice investigates the alleged fraudulent claims against Tricolor Auto Acceptance, one expert warns that there may not be enough collateral to satisfy the subprime lender’s outstanding debt with all its financiers.

In more common bankruptcy scenarios, assets are liquidated to repay outstanding debt.

“What makes it a little bit more complicated [with Tricolor] is there's 25,000 creditors in this particular case that have claims here, and some of them have claims against the same collateral,” Brian Bastin, program director for the business and automotive programs at Fort Lauderdale, Fla.-based Keiser University, tells Auto Finance News in this week’s podcast.

JPMorgan Chase, Origin Bank and Fifth Third Bank all had existing warehouse lines with Tricolor and are just some of those in the long list of Tricolor’s creditors.

“In all likelihood, there probably is not going to be enough money to be able to make whole everybody in this particular situation,” Bastin says, noting that there is a pecking order to claims and payments as a result of liquidating the lender’s assets for its Chapter 7 bankruptcy.

“In all likelihood, there probably is not going to be enough money to be able to make whole everybody in this particular situation.” -- Brian Bastin, program director for the business and automotive programs, Keiser University,

Consumers should be proactive about making sure that any former loans, title liens, service contracts and warranties are properly dealt with to avoid any road bumps down the road.

Join Senior Associate Editor Truth Headlam and Keiser University’s Brian Bastin as they break down the potential implications of Tricolor’s bankruptcy for lenders, consumers and the subprime market as a whole in this week’s Weekly Wrap.

This episode is sponsored by The Work Number by Equifax.