Even if your car is repossessed and later sold at auction, you might not be off the hook. If you car sold at auction for less than you owed on the loan, you must still pay the remaining balance to your lender. If you do not make those payments, your creditor can sue you in court.
Do you still owe money after repossession?
If your car or other property is repossessed, you might still owe the lender money on the contract. The amount you owe is called the “deficiency” or “deficiency balance.”
What happens if you don’t pay a deficiency balance?
If you refuse to pay, the debt will most likely be sold to collections. But either the lender or the collector can choose to file a lawsuit against you, which could result in a wage garnishment, a levy against your bank account or a lien against your other property.
What happens if you owe money on a repossessed car?
If you owe money on your repossessed car, this debt will be discharged with the rest of your unsecured debts. It doesn’t matter if the repossession happened before or after filing for bankruptcy. Filing your papers will stop the collection agency from going after you for the rest of the auto loan if your car was repossessed.
What happens if you sell your car for more than what you owe?
Car Equity: If Your Car Is Worth More Than What You Owe Your car may be worth more than what you owe on the loan. This is what is known as having equity in the car. If your car sells for more than what you owe, you won’t have to pay the lender any more money and will get funds back from the excess amounts the car sold for.
When do you still owe money on a car loan?
When the lender sells the car at auction, the vehicle’s selling price will be one of the biggest deciding factors on whether or not you still owe money: When you have equity in the car – Equity is when the car is worth more than what you owe on the loan.
Do you have to pay deficiency balance on repossession?
The deficiency balance is the difference between the car’s selling price plus the costs of repossessing and storing the vehicle compared to the loan balance. You’re responsible to pay the lender back the deficiency balance, and if you fail to do so it could result in legal action.
