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Information on Creditor Actions On A Deficiency Balance - The Bills.com Blog
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Information on Creditor Actions On A Deficiency Balance
Question: If I default on my loan, besides affecting my credit and repossessing the car, what can the lender legally do? I know that if they sell the car, they will get enough to pay it off, can they take other measures to get the rest from me?
Answer: One of the biggest problems caused by the repossession of vehicles is that most consumers end up owing a large sumof money, called a deficiency balance, to the finance company even though the consumer no longer owns the vehicle. When a car is repossessed, the lender usually auctions the vehicle and applies the amount received at auction to the balance of the loan. The former owner is responsible for the balance of the loan less the amount received at auction, which can leave the former owner owing many thousands of dollars in a deficiency balance.
If you end up owing a deficiency balance after your vehicle is repossessed, the creditor can proceed with collection action against you, and could possibly file a lawsuit against you to collect the debt. Depending on your state’s laws, if a creditor files a lawsuit and obtains a judgment against you, it may be able to garnish your wages, levy your bank accounts, and place liens on any property you own. To read more about your specific state’s laws
regarding what property can be taken to enforce judgments, I encourage you to visit http://www.bills.com/collection-laws
In addition to the risk of the creditor filing a lawsuit against you, having a deficiency balance appearing on your credit reports can significantly lower your credit score, making rebuilding your credit score very difficult. I would encourage you to work with the creditor to negotiate repayment terms to resolve any deficiency balance owed on your vehicle. If you can save or borrow a lump sum to offer a settlement to the creditor, the creditor may be willing to settle the account for significantly less than what you actually owe. Frequently, creditors will settle for as little as 30% or 40% of the balance owed. If you cannot raise a lump sum to settle the account, you should be able to negotiate
an affordable repayment plan with the creditor to prevent further collection activity on the debt.
While I encourage you to try to repay any deficiency balance on your vehicle, you should keep in mind that the more time that passes from the time you defaulted on the auto loan, the less impact the account will have on your credit score. Even if you are unable to resolve the delinquency balance, you should be able to rebuild your credit score over the course of the next few years, but you must be responsible with any credit that is extended to you.
To learn more about credit and ways to improve your credit score, I encourage you to visit the Bills.com Credit Solutions and Resources page . I hope that the information I have provided will help you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
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