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Can You Be Sued For More Money After Your Car is Repossessed?

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.