Advice on loan payments after reposession

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Mark Cappel

UpdatedAug 27, 2024

Do you half to pay any money on the truck if the truck gets repoed because of missed payments?

When a vehicle is repossessed, the lender will usually sell the vehicle at auction, then apply the money received at auction to the balance owed on your auto loan. If the lender receives less money at the auction than you still owe on the vehicle, the difference is called a deficiency balance. Generally speaking, you would be liable to the creditor for the deficiency balance, which means you will probably still owe money to the creditor even though you no longer have the vehicle. The creditor may be willing to negotiate a repayment plan or lump-sum settlement with you to repay the deficiency, but if you fail to make arrangements with the creditor, the creditor could sue you to obtain a judgment against you, which could result in wage garnishment, a lien on your property, and/or bank levies, depending on the laws in your state. Thankfully, trucks tend to hold their value better than most other vehicles, meaning that you will probably owe less money as a deficiency balance than many other consumers in your position.

Because deficiency balances on automobile loans can cause a significant financial hardship, you should work diligently to prevent the vehicle from being repossessed, if at all possible. First, you should contact the creditor to discuss options to bring the loan current, such as deferral of the missed payments. If the lender will not work with you in bringing the loan current, you should look into borrowing the money needed to bring the loan current. If you cannot borrow the money to repay your missed payments, or if you cannot afford to continue making your regular monthly payments, you may have no choice but to allow the car to be repossessed. In that case, you should contact an attorney to discuss the laws in your state regarding the collection of deficiency balances, and what options are available to you to resolve the debt. For example, many consumers whose vehicles are repossessed find that filing bankruptcy can help solve their financial problems; I encourage you to visit the Bills.com Bankruptcy Information page at http://www.bills.com/bankruptcy/ to learn more about bankruptcy and the options available to you. In addition, if you are unable to file bankruptcy, a debt resolution program, such as debt settlement, may be able to help you negotiate a settlement with you creditor. To learn more about bankruptcy alternatives, I invite you to visit the Bills.com Debt Help page at http://www.bills.com/debt-help/.

I wish you the best of luck in resolving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.Bills.com

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Dealing with debt

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Minnesota, 13% have any kind of debt in collections and the median debt in collections is $1623. Medical debt is common and 2% have that in collections. The median medical debt in collections is $418.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.

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10 Comments

DDestiny, Jan, 2012

Hello:I had a repossession about 5 years ago. It is on my credit as a repossession. My husband and I will be debt free this year and I wanted to know if this is something that I need to pay off?

BBill, Jan, 2012

A derogatory item on a credit report is not an indication of whether a debt is owed. A credit report is sort of like a newspaper, and not everything published in either is always 100% accurate. Most derogatories remain on a credit report for 7½ years from the date of first delinquency. If the debt was not paid in full, your obligation to pay will depend on the the actions the creditor takes and your statute of limitations.

BBill, Dec, 2009

First, you are not liable for the damage caused to the vehicle by the repossession company. Second, generally speaking, if the vehicle had a $12,000 balance on the loan and was auctioned for $7,000, you would owe $5,000 plus the cost of the repossession. Here, the vehicle was damaged by the repossession company while in its custody, so presumably the vehicle would have auctioned for a greater price. You owe the difference between the balance on loan minus the fair market value at auction. Your DMV may or may not keep a record of the last transaction price. I urge you to consult with an attorney in your state who has experience in consumer law. Between the damage caused by the repo company and the creditor trying to make you pay the entire balance of the loan, your rights are being trampled here.

JJai, Dec, 2009

I had a car that I paid on for a yr. I hit hard times with medical bills and was behind on the car. It was repo'd and trashed by the tow company..flat balded tires, back bumper on front hood side quarter panel 1/2 off etc. I was furious I tried taking pictures at the repo lot and got yelled at after paying 25.00 to get my stuff out of the car. My main question though is if I owed 12'000 total paid 1 yr on it and they sold it at auction for 7,000 wouldnt i just owe the balance? The credit co that took the collection over is trying to get me for a full 12,000. Can they do that? I paid a yr and they made 7,000 or better at auction on it... isnt that collecting twice ?? Is this legal ??? I made a payment arrangement for 6 mths at 160.00 a mth just to stop this from going to court cause they threatened garnishment. I dont have the old letter showing what they paid at auction either. Would the dealership I got the car at have notification of the auction or where do I get a copy from? Or can DMV provide records of the VIN to back track the car ?

FFranky, Apr, 2009

Negotiating for a settlement can be a long and arduous process. You will have to go back and forth quite a few times before you can get an offer that will be as less as 50%. A lot will depend on your financial situation as well. Make sure that you any offers are given out in a written form and never send a payment based on just a verbal agreement. For more tips, see here: https://www.bills.com/debt-negotiation-and-settlement/

ttdawgdelight, Apr, 2009

My car was reposessed and I only got 1 letter saying that I owe an awful lot of money, but nothing about them suing me. It simply was sold to a collection agency. Do you think I have a chance gettting a 50% less settlement offer?

BBill, Sep, 2008

Is the settlement on a payment plan? As long as the account shows some balance it is going to create problems for you to get another loan. I do not know particular lenders that deal with borrowers with less than perfect credit, but you can fill in your information on our auto loan request form and see if you are matched with any lenders. If not, then you will have to finish paying this settlement, and then wait for a while for your credit to recover before you can apply, or you can use a co-signor.

CCHANTELLE, Sep, 2008

Hi, our car has been recently reposessed & the delinquent account is now being handled by a creditor. We have settled on a reduced payout option however are unable to secure a loan as the repo has significantly dropped credit rating.Any suggestions of a financial institution or other source to contact? Prefferably without the need of a co-signer/applicant

NNathan, Jan, 2008

Please keep in mind that as long as the finance company has the title to your car, and if you default on your payments, they have the authority to repossess your vehicle. Usually most finance companies do it after 60 days of non payment, but it can be as early as 30 days. You will need to refer to your contract to see what the terms are.

JJeanette, Jan, 2008

I'm behind in my payments by 1 month, and I HAVE 6 MORE PAYMENTS LEFT AND THE CAR WILL BE PAID OFF. I'm getting threating calls telling me that they are processing the paperwork to have my car repo'd Is this legal I live in the state of Missouri. Thanks