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Can a creditor sue after repossession?

On Behalf of | Jul 16, 2021 | Bankruptcy

A car deficiency is an issue that may arise following a vehicle’s repossession. With a deficiency, what has happened is that the creditor repossessed the vehicle, sold it and didn’t get enough to pay off what you owed.

If this happens, a creditor may sue you for the remaining amount of what you owe following the deduction of the profits of the sale. If the creditor sues, they may get a deficiency judgment for the remaining money, which is why it’s called a car deficiency.

Can a car lender collect on a deficiency judgment?

Yes. Once they get a deficiency judgment, they can take steps to collect that money. They may ask the court to garnish your wages or ask for other resolutions.

What happens if the vehicle sells for more than it’s worth?

In some cases, a vehicle will sell for more than the remaining value of the loan. If the vehicle sells for more than what you owe including the expenses the lender had to take on in order to repossess and sell the vehicle, the difference will be called a surplus. The surplus funds may need to be given to you.

What can you do if you face a vehicle repossession?

If you get into tough financial times, then you need to reach out to your lender as soon as you can. They will often work with people who have lost their jobs or who need more time to pay if they know when the payment will be expected. You might be able to get fees or other penalties reduced, too, so that you can make the repayment on time and in full in the future.

If you believe that your vehicle could be valued at more than it’s worth and are at risk of losing it, it may be a good idea to sell your vehicle as soon as possible and before defaulting on the loan.

If that’s not possible, then consider voluntary repossession, which could result in fewer fees. You may still need to pay the deficiency in the future.

Finally, if a deficiency is determined and you still can’t pay, you may want to consider bankruptcy to help protect your financial interests.

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The Law Office of Kim Covington, is a woman owned debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 24 years.