Even after your car is repossessed, your financial responsibilities might not be over. It’s important to understand that repossession is not the end of the story, and you may still be accountable for certain costs associated with the vehicle. Here’s what you need to know about what happens after your car is repoed.
Repossession Fees You Might Face
When your lender repossesses your vehicle, they typically charge a fee to cover the expenses of picking it up and storing it. These repossession fees are added to your debt. While lenders are allowed to charge these fees, they must be reasonable.
What is considered “reasonable” can depend on various factors, and is often determined by courts. Factors influencing reasonableness include the type of vehicle, the method used for repossession, and the location from where it was taken. Don’t hesitate to request a detailed breakdown of all repossession costs from your lender to understand exactly what you’re being charged.
Deficiency Balance or Surplus After Vehicle Sale
After your car is repossessed, the lender will usually sell it to recoup their losses. However, the sale price might not cover the full amount you still owe on your loan, along with the repossession fees. In this situation, you might be responsible for paying the “deficiency balance.” This is the difference between what you owed (loan balance plus repossession fees) and the car’s sale price.
Conversely, if your car is sold for more than the outstanding loan amount and repossession costs, you are legally entitled to receive the “surplus” – the excess money after all debts are settled.
Lenders are legally obligated to sell your repossessed vehicle in a “commercially reasonable manner.” This means the sale process should be fair and designed to achieve a reasonable market price. It’s crucial to know the sale price of your vehicle, and if you believe the sale price was unreasonably low, you should consider seeking legal advice from an attorney.
For instance, imagine you still owe $10,000 on your car loan, and the lender sells it for $7,500. You would then owe a deficiency balance of $2,500, in addition to any repossession fees. If you fail to pay this deficiency balance, the lender has the right to hire a debt collector to pursue the outstanding debt.
On the other hand, if the car in the same scenario was sold for $12,000, you would be entitled to receive the $2,000 surplus after your $10,000 loan is paid off (assuming repossession fees are already covered or deducted).
Understanding Your Rights After Repossession
Remember that you have rights under state law following a car repossession. To learn more about 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. Additionally, consulting with a private attorney or your local legal services office can offer personalized advice and support in navigating the complexities of car repossession and your financial obligations. They can help you understand if the repossession and sale were handled legally and fairly, and advise you on the best course of action.
