Dealing with a repossessed vehicle can be embarrassing. Many people are
reluctant to acknowledge that they are facing financial problems which
led to the repossession, and as a result, fail to read documents or follow
up on the status of their vehicles. Unfortunately, people who do not check
in on their vehicles after a repossession may find themselves facing a
lawsuit over the deficiency on the loan balance.
In most vehicle leases and loans, the creditor includes a clause which
allows the company to repossess the vehicle if the borrower falls behind.
After a car is repossessed, the creditor will usually put the vehicle
up for sale at an auction. If the car sells for less than the balance
remaining on the loan, the original owner or lessor will be responsible
for paying the difference.
For example, suppose that a woman buys a vehicle for $10,000, and takes
out an auto loan to cover the purchase. After paying $2,000 of the loan
balance, she falls behind in payments. The auto loan company repossesses
the car, and sells it at auction for $5,000. The woman will likely be
responsible for paying the $3,000 balance remaining after her $2,000 in
payments and the $5,000 auction price is subtracted from the original
value of the loan.
In Florida, a creditor is prohibited for pursuing a deficiency judgment
against a vehicle owner if the remaining balance is less than $2,000.
(Fla. Stat. Ann. §516.31(3)). When the unpaid balance is more than
$2,000, the creditor has the right to pursue the person who owes the debt
for the remaining money owed. The total amount of the deficiency will
be determined by deducting the fair market value of the vehicle from the
remaining balance of the loan. The judge in any deficiency lawsuit will
have the ultimate decision on a vehicle’s actual fair market worth.
There are ways to prevent lawsuits based on the deficiency in the loan
value. First, there may be a defect in the auto loan papers that prevents
the creditor from filing a lawsuit. For instance, the creditor may have
failed to include a clause in the contract that gives the auto loan company
the right to repossess the property or collect a deficiency judgment.
Next, the creditor may have failed to sell the vehicle or may have sold
it for less than it was reasonably worth. Creditors have a responsibility
to minimize their losses, and a creditor that fails to do this may be
barred from filing a lawsuit seeking a deficiency judgment. For that reason,
it is important to check and see if your repossessed vehicle was sold,
and if so, for how much.
Finally, the person who owes the deficiency judgment may have filed for
bankruptcy. While a bankruptcy case would probably not result in the person
retaining ownership of the vehicle, a bankruptcy case would prevent the
creditor from seeking a judgment on the remaining balance.
If you have had a vehicle repossessed, it is important to be proactive
in protecting yourself from your creditors. At Loan Lawyers, our attorneys
can review your claims and will help you make the best decisions to safeguard
yourself financially. To schedule a free consultation with our office,
contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813). We work
on a contingent fee basis, which means that you have nothing to lose by
calling. Protect your rights today by meeting with our experienced South
Florida debt defense attorneys at one of our three conveniently-located offices.