If you default on your car payments for several months, the lender can seize your vehicle without issuing any prior notice to you. This is called as repossession of the car. And for someone who is very dependent on their car for work and other daily activities, this can be a massive blow. In this article, we list out a few things that you should know about car repossession.
- After Repossession Of The Car
Once the car has been repossessed by the lender, they will have the full right to sell it and reclaim the money that you owe them. But the law puts strict conditions on the selling process. For one, the lender is legally obliged to notify you when the car will be sold. They also have to state the venue and time of the sale. The lender is also expected to do the sale in a manner that is commercially acceptable, failing which they can face legal consequences.
- Deficiency Balance
Just because the lender sold your car does not mean that you don’t owe them anything anymore. If the selling price of the vehicle turns out to be insufficient in meeting the outstanding debt, then you will still be liable for the difference between the two. And this is known as the deficiency balance. For example, your outstanding debt might be $3800, but the car may only have fetched $2500. As such, you are still liable to pay $1300 to the lender as deficiency balance.
Now, when the lender asks you to pay them the remaining amount, you can counter the demand on various grounds. The first way is by proving that the lender did not act in a commercially acceptable manner when they sold the car. So, if you see that the lender has done something shady to sell the car which is against common sales practices, you have the right to claim damages against the lender.
Likewise, you can claim that the lender acted in a manner that breached the peace during the Repossession of the car. What this means is that the lender used force and criminal or socially unacceptable behavior during the repossession to take the car away from you. And if you do have proof of such actions, then you will easily be able to back your argument and force the lender to drop their claim. You can even sue the lender for their irresponsible behavior.
Finally, the lender might end up being so late suing you for the deficiency balance that the statute of limitations might have run out. The ‘statute of limitations’ declares that one cannot sue another person once a ‘reasonable’ period has passed away. The timeframe will vary depending on the state. So, check the statute of limitations of your state and see whether the lender’s claim has exceeded the time limit or not. If it has surpassed the ‘reasonable’ period, you are no longer under any obligation to honor their debt claims.
- Getting The Car Back
If the lender has repossessed the car but has not sold it as of yet, you can get your car back through many ways. For one, you can try redeeming the car, which means that you settle the accounts with the lender. To do this, you will have to pay all the outstanding debt and charges to them. The second way is by reinstating the loan. Here, you will pay the lender all the arrears that are due plus the repossession costs. The lender will then release the car under condition that you continue making monthly payments as expected. And if the lender has repossessed the car and is conducting an auction to sell it off, you can visit the auction site, participate in the auction, and buy back your vehicle. But again, if there is any deficiency balance, you will still be held liable.
- File For Bankruptcy
If you were unable to make payments because of your severe lack of money and you know that the lender will come for seizing your vehicle, then the best thing you can do is to file for bankruptcy. From the moment you file for bankruptcy, the lender is legally obliged to avoid repossessing your car. They will require the permission from the court to do any such thing. But the court will take its own time to deliberate on your bankruptcy and decide how your assets must be distributed to creditors. In the meanwhile, you will have sufficient time to talk with the lender and reach an amicable agreement that is beneficial to you both.
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