Getting Rid Of A Repossession Deficiency Judgment
When you can’t make your car payment and you start to fall seriously behind in payments, you probably know that it’s likely that repossession of the car is coming. The repossession of your vehicle is bad enough. But what many people don’t realize is that even after repossession, you may face what is known as a deficiency judgment.
What is a Deficiency Judgment?
When the lender repossesses your car, the car will be sold. If it sells for more than what you owe, there is no problem—you won’t owe any money.
But if your car sells for less than what you owe, you still owe the balance of the loan. That balance is money that you owe and the lender can come after you to pay that money, just like any creditor can. Now, you not only have no car, but you have a large money judgment against you, and if you want to try to pay that amount off, that’s money you now do not have to pay for a new car.
Getting Rid of or Fighting the Deficiency
Bankruptcy often can help you get current with your car payments. It may even be able to help you lower what you owe on the loan in total. If you have a money judgment against you already for the car because it was already repossessed the bankruptcy can wipe out the money that you owe (the deficiency judgment).
If you opt not to file for bankruptcy, there are still some options.
Notice – Before the lender can sell your car, it has to publicize the sale or auction of the car. If it does not do so in accordance with the law, you can challenge the money that you owe.
Auction Problems – Your car must be sold in what is known as a commercially reasonable manner. Sometimes, companies that repossess your car may not use these methods. If they don’t, you can challenge the deficiency judgment against you.
Personal Property – The law requires that any personal property inside your car be returned to you. Many repossession companies don’t bother with this. If they do not, you may be able to offset the amount of the deficiency with the value of the personal property that should have been returned to you but which was not.
The Best Option? Bankruptcy
As you can see, there are ways to challenge a deficiency. But like any court action, you don’t know what a judge is going to do. That’s why bankruptcy is often the best answer.
The lender has no defenses—if you file for bankruptcy and qualify for a discharge, the lender is powerless, and you are not only off the hook for the deficiency, but you may now have some extra monthly income to afford another car payment so that you can get back on the roads.