Discovering your car has been repossessed can be a distressing experience. It’s important to understand that even after losing physical possession of your vehicle, your financial obligations might not be over. Here’s what you need to know about the costs and potential outcomes following a car repossession.
Understanding Repossession Fees
When your lender repossesses your vehicle, they typically incur costs to pick it up and store it. These repossession fees are usually passed on to you, the borrower. While lenders are entitled to recover these costs, they must be reasonable.
What constitutes a “reasonable” repossession fee isn’t strictly defined and can depend on various factors. These include the type of vehicle, the method of repossession (peaceful or requiring more effort), and the location of the repossession. To understand the specific fees being charged in your case, you have the right to request a detailed list of repossession costs from your lender. Reviewing this list is crucial to ensure you’re being charged fairly.
Deficiency Balance and Surplus Explained
After repossession, the lender will usually sell your car to recoup the outstanding loan amount. This sale price is a key factor in determining if you still owe money or if you might be entitled to a surplus.
If the sale price of your repossessed vehicle is less than the remaining balance on your loan (including repossession fees), you will be responsible for paying the “deficiency balance.” This is the difference between what you owed and what the car sold for.
For instance, if you owed $10,000 on your car loan and after repossession and fees, the car is sold for $7,500, you would owe a deficiency balance of $2,500. Lenders are within their rights to pursue this balance, and may even hire debt collectors to recover the amount.
Conversely, if your car sells for more than what you owe on the loan plus repossession expenses, you are legally entitled to the surplus funds. It’s important to track the sale of your vehicle to understand if a surplus is due to you.
Lenders are legally obligated to sell the repossessed vehicle in a “commercially reasonable manner.” If you believe the sale price was unfairly low, potentially impacting your deficiency balance or surplus, it is advisable to seek legal counsel to explore your options.
Know Your Rights and Seek Guidance
Beyond federal regulations, your state laws also provide specific rights and protections related to car repossession. To gain a deeper understanding of your rights in your specific state, consider reaching out to your state attorney general or your state consumer protection office. These resources can provide valuable information and guidance.
For personalized legal advice regarding your car repossession situation, consulting with a private attorney or your local legal services office is recommended. They can help you navigate the complexities of repossession, understand your rights, and advise you on the best course of action.
