Even when you decide to give up your car for repossession, your financial obligations might not end there. It’s crucial to understand that surrendering your vehicle doesn’t automatically wipe the slate clean. You could still be responsible for several costs associated with the repossession process. Here’s a breakdown of what you need to know if you are considering giving up your repo car.
Understanding Repossession Fees
When your lender repossesses your car, they typically incur costs for the process of picking it up and storing it. These are known as repossession fees, and they are generally passed on to you, the borrower. While lenders are within their rights to charge these fees, they must be “reasonable.”
The definition of “reasonable” isn’t fixed and can be interpreted by courts depending on various factors. These factors include the type of vehicle being repossessed, the method used for repossession (peaceful or requiring more effort), and the location from where the car was taken. To get clarity, you have the right to request a detailed list of all repossession costs from your lender. Reviewing this list will help you understand exactly what you’re being charged for.
Deficiency Balance and Surplus After Vehicle Sale
After repossession, lenders usually sell the vehicle to recover the outstanding loan amount. However, the sale price might not always cover the full amount you still owe. This is where the concepts of deficiency balance and surplus come into play.
If your car is sold for less than the remaining loan balance plus repossession expenses, you will be responsible for paying the difference. This difference is called a “deficiency balance.”
For example, imagine you still owe $10,000 on your car loan, and after repossession and associated fees, the lender sells it 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 your repossessed car is sold for more than what you owe on the loan plus repossession fees, you are legally entitled to receive the “surplus” – the excess money after all debts are settled.
It’s important to note that lenders are legally obligated to sell the repossessed car in a “commercially reasonable manner.” This means the sale process should be fair and aimed at achieving a reasonable market price for the vehicle. If you believe the sale price obtained for your repossessed car was unreasonably low, it is advisable to consult an attorney to understand your options and potentially challenge the sale.
Know Your Rights and State Laws
Your rights regarding car repossession can vary depending on your state’s laws. To gain a comprehensive understanding of your rights and protections, you can reach out to your state attorney general and your state consumer protection office. These resources can provide valuable information specific to your location. Additionally, seeking advice from a private attorney or your local legal services office can offer personalized guidance based on your specific situation.
In conclusion, giving up your car to repossession is not the end of your financial responsibility. You may still face repossession fees and potentially a deficiency balance. Understanding these implications and knowing your rights is crucial. If you are facing car repossession, consider seeking legal advice to navigate the process effectively and protect your financial interests.
