Even after your car is repossessed, your financial obligations to the lender might not be over. It’s crucial to understand what to expect after a car repossession to manage the situation effectively.
Repossession Fees You Might Encounter
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. While lenders are entitled to recoup these expenses, they must be reasonable. The definition of “reasonable” can be subjective and may be evaluated by a court depending on factors such as the type of vehicle, the repossession method, and the location of repossession. You have the right to request a detailed breakdown of all repossession costs from your lender to ensure transparency and identify any potentially inflated charges.
Deficiency Balance vs. Surplus After Vehicle Sale
Following repossession, the lender will usually sell the car to recover the outstanding loan amount. This sale can lead to two financial outcomes for you: a deficiency balance or a surplus. If the sale price of the repossessed vehicle is less than the remaining loan balance plus repossession expenses, you will be responsible for paying the “deficiency balance.” This is the difference between what you still owed and what the car sold for, plus any repossession-related fees. For instance, if you owed $10,000 and the car was sold for $7,500, you would owe $2,500 plus repossession fees. Failure to pay this deficiency balance can lead the lender to involve debt collectors to recover the amount.
Conversely, if the vehicle is sold for more than what you owe on the loan, after covering repossession fees and sale expenses, you are legally entitled to receive the surplus. It’s essential to stay informed about the sale price of your repossessed vehicle because lenders are legally obligated to sell the car in a “commercially reasonable manner.” This means the sale process should be fair and aim to achieve the best possible price under market conditions. If you believe the sale price was unreasonably low, potentially resulting in a higher deficiency balance or a lower surplus, you should consider seeking legal advice from an attorney to explore your options.
Your Rights and Resources After Repossession
State laws provide additional protections and rights after a car repossession. To understand your specific rights, it is advisable to contact your state attorney general or your state consumer protection office. These resources can provide information on repossession laws in your state and help you understand if your lender has acted lawfully. Furthermore, consulting with a private attorney or your local legal services office can provide personalized legal advice and guidance based on your situation. They can help you assess if the repossession and sale were conducted legally and advise you on how to proceed if you believe your rights have been violated.
