A deficiency balance is the net difference between the amount a borrower owes on a secured loan and the amount the creditor receives after selling the collateral that secures the loan. The lender may also add administrative fees and costs associated with selling the collateral to the total deficiency balance.
What happens if you don’t pay back a cosigned loan?
Usually, when you cosign a car loan, you agree to be responsible for the debt if the primary debtor does not make payments or otherwise defaults on the loan. If you don’t pay up, the creditor may sue you to collect the deficiency.
What happens if you are sued for a car loan deficiency?
If you are being sued for a car loan deficiency, do not ignore it. You still have an obligation to the lender for the deficient balance, even if you don’t have the vehicle. If you disregard a summons to appear in court, the case will proceed without you and a default judgment could be entered against you for the balance of the debt.
How to deal with a deficiency on an auto loan?
Dealing with an auto loan deficiency balance and debt collection A deficiency debt on an auto loan results from owing more on the loan than the car will fetch at auction after repossession or surrender. You have options.
What happens when you default on an auto loan?
When you default on an auto loan, the bank will usually repossess the car and sell it — often for far less than the value of the car. When the proceeds of the sale do not cover the entire auto loan, the bank may sue you for the remainder (called the “deficiency”).
Can a deficiency judgment be settled right away?
There may not be good options for you to settle the deficiency judgment right away. In that case you can try to manage your affairs on as much as a cash basis as you need to until you have a plan to resolve the debt. You mentioned being a cosigner on the loan originally and that your son not hearing anything on this.
