Car repossession can be a stressful and confusing experience. It’s crucial to understand that even after your vehicle is taken back by the lender, your financial obligations might not be over. This guide explains what happens after repossession and what you need to know about potential costs and your rights.
Understanding Repossession Fees
When your lender repossesses your car, they will typically charge a fee to cover the costs associated with picking up and storing the vehicle. It’s important to know that these repossession fees must be “reasonable.” The definition of “reasonable” isn’t fixed and can be interpreted by courts depending on the specifics of each situation. Factors influencing what’s considered reasonable include the type of vehicle, the method of repossession (peaceful or requiring more effort), and the location of the repossession.
To gain clarity on these charges, you have the right to request a detailed list of all repossession costs from your lender. Review this list carefully to ensure transparency and accuracy.
Deficiency Balance vs. Surplus After Vehicle Sale
After repossession, the lender will usually sell your car to recover the outstanding loan amount. This sale can lead to two possible financial outcomes for you: a deficiency balance or a surplus.
A deficiency balance occurs when the sale price of your repossessed vehicle is less than the total amount you still owe on the loan, including repossession fees. In this scenario, you are responsible for paying the difference.
For example, if you owe $10,000 on your car loan and the lender sells the repossessed vehicle for $7,500, you would have a deficiency balance of $2,500, in addition to any repossession fees. Lenders are within their rights to pursue collection of this deficiency balance, and they may hire a debt collector to recover the funds.
Conversely, a surplus happens if the car is sold for more than what you owe on the loan, after covering repossession fees and sale expenses. In this case, you are legally entitled to receive the surplus funds back from the lender.
Using the previous example, if the car were sold for $12,000, you would be entitled to receive the $2,000 surplus (minus any applicable fees).
It’s crucial to ensure that the lender sells the car in a “commercially reasonable manner.” This means the sale process should be fair and designed to achieve a reasonable market price for the vehicle. If you believe the sale price obtained for your repossessed car was unreasonably low, it’s advisable to consult with an attorney to explore your legal options.
Know Your Rights and Seek Legal Advice
State laws can provide additional protections and rights for consumers facing car repossession. To understand your specific rights, you can reach out to your state attorney general or your state consumer protection office. These resources can provide valuable information and guidance relevant to your location.
For personalized legal advice regarding your car repossession situation, consider consulting with a private attorney or your local legal services office. An attorney can help you understand your rights, review your loan agreement, and advise you on the best course of action.
Navigating car repossession can be complex, but understanding your financial responsibilities and legal rights is essential. By being informed and proactive, you can protect your interests and manage the situation effectively.
