Car repossession doesn’t always mean you’re free from financial obligations related to your vehicle. Even after the lender takes back your car, there are several steps and potential costs you need to be aware of. Understanding these post-repossession processes is crucial for your financial well-being.
Understanding Repossession Fees
When your lender repossesses your vehicle, they typically incur costs for picking it up and storing it. These repossession fees are generally passed on to you, the borrower. While lenders are entitled to recoup these expenses, the law dictates that these fees must be “reasonable.”
What constitutes “reasonable” is not a fixed amount and can be determined by courts based on various factors. These factors include the type of vehicle repossessed, the method used for repossession, and the location from where it was taken. You have the right to request a detailed breakdown of all repossession costs from your lender to ensure transparency and identify any potentially unreasonable charges.
Deficiency Balance and Surplus After Car Repossession Sale
Following repossession, the lender will usually sell your car, often through auction. This sale is intended to recover the outstanding loan amount. However, the sale price may not always cover the full balance you owe. This is where the concepts of “deficiency balance” and “surplus” come into play.
If the sale price of your repossessed vehicle is less than the remaining loan amount plus 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, plus any allowable repossession expenses.
For example, imagine you still owed $10,000 on your car loan, and after repossession and sale, the car was sold for $7,500. In this scenario, you would owe a deficiency balance of $2,500, in addition to the repossession fees. Failure to pay this deficiency balance can lead the lender to hire a debt collector to pursue the outstanding amount.
Conversely, if the vehicle is sold for more than what you owe on the loan, after covering repossession fees and the loan balance, you are legally entitled to receive the “surplus.” Using the previous example, if the car sold for $12,000, you would be entitled to the surplus amount after the loan and fees are settled.
Commercially Reasonable Sale and Your Rights
Lenders are legally obligated to sell your repossessed vehicle in a “commercially reasonable manner.” This means the sale process must be fair and designed to achieve a reasonable market price for the car. It’s important for you to be informed about the sale price of your vehicle, as this directly impacts any potential deficiency balance or surplus.
If you believe that the sale price obtained for your repossessed car was unreasonably low, you have the right to consult with an attorney to explore your legal options. Challenging an unreasonable sale price could potentially reduce your deficiency balance or help you claim a larger surplus.
Furthermore, your state laws may provide additional rights and protections related to car repossession and the subsequent sale. You can find more information about your rights by contacting your state attorney general’s office or your state consumer protection agency. Seeking advice from a private attorney or a local legal services office can also provide personalized guidance based on your specific situation and location.
In conclusion, car repossession is not the end of the financial story. Understanding repossession fees, deficiency balances, surplus rights, and the requirement for a commercially reasonable sale is vital. Being proactive in understanding your obligations and rights can help you navigate the complexities after your car is repossessed.
