Even after your car is repossessed, your financial obligations might not be over. It’s crucial to understand what to expect and what you’re still responsible for. Here’s a breakdown of what typically happens after a car repo.
Understanding Repossession Fees
When your lender repossesses your vehicle, they will usually charge a fee to cover the costs of picking it up and storing it. While lenders are entitled to recoup these expenses, these repossession fees must be reasonable.
What exactly constitutes “reasonable” can be subjective and is often determined by courts. Factors considered include the type of vehicle, the method of repossession (peaceful or requiring more effort), and the location of the repossession. You have the right to request a detailed list of all repossession costs from your lender to ensure transparency.
Deficiency Balance and Surplus Explained
After repossession, the lender will typically sell your car to recover the outstanding loan amount. This sale has significant financial implications for you, potentially leading to either a deficiency balance or a surplus.
A deficiency balance occurs when the sale price of your repossessed vehicle is less than the remaining balance on your loan, plus the repossession fees. In this situation, you are responsible for paying this difference.
For example, if you still owe $10,000 on your car loan and it sells for $7,500 at auction, you would owe a deficiency of $2,500, in addition to any repossession fees. Failure to pay this deficiency can lead the lender to hire a debt collector to pursue the outstanding amount.
Conversely, a surplus happens if your 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.
It’s imperative to be aware of the sale price of your repossessed vehicle. Lenders are legally obligated to sell the car in a “commercially reasonable manner.” If you believe the sale price was unfairly low, it is advisable to consult with an attorney to explore your legal options.
Your Rights and Further Recourse
State laws provide additional protections and rights after a car repossession. You can find detailed information about your specific rights by contacting your state attorney general or your state consumer protection office. These resources can provide guidance on repossession laws in your jurisdiction.
Furthermore, seeking advice from a private attorney or your local legal services office can help you understand your rights and options in your specific situation. They can advise you on whether the repossession and sale were conducted legally and fairly, and assist you in disputing any unreasonable charges or sale prices.
Understanding what happens after a car repo is essential to managing the financial aftermath and protecting your rights. Don’t hesitate to seek professional legal advice to navigate this complex process.
