What happens to the balance on a voluntary repossession?

Even if you surrender your vehicle to your lender voluntarily, the lender has the legal right to collect on any balance remaining on the debt after the car is sold at auction. This type of debt is referred to as a “deficiency balance.” The creditor may even file a lawsuit against you to collect on the unpaid deficiency balance.

What happens if you can’t pay off a repossession?

If you aren’t able to pay off the repossession in full, you may be able to reach a settlement with the lender, often a single lump sum payment for half or less of the remaining debt. The lender writes off the rest and stops all further collection action. Be careful when settling, because it can backfire.

Can a car be repossessed without going to court?

This is called repossession and because of the terms of your loan, the lender can do this without having to go to court. But, when you take your vehicle back to the lender or dealership before they send the repo man for it, that’s called voluntary repossession.

When does a bank have the right to repossess a house?

Most banks will give you a chance to explain yourself. Repossession can be devastating. Unfortunately, mortgage law gives your lender the legal right to repossess your home, once you are in arrears for 90-180 days. You have failed to honour your side of the debt agreement.

What happens to the car after a repossession?

Bid at auction: Lenders might sell your car through a private sale or public auction. The lender should inform you about what happens to the vehicle after repossession. If the car will go to auction, you can try to attend and bid on the car.

Can a creditor Sue you for a voluntary repossession?

The creditor may even file a lawsuit against you to collect on the unpaid deficiency balance. You should, therefore only proceed with a voluntary repossession if you truly cannot afford the loan, as you will likely still owe the lender a significant amount of money, even after you no longer have the use and benefit of the property.

Can a counterclaim be made in a car repossession?

As counterclaims, you can raise any deficiency in the repossession process. For example, if the lender breached the peace in retrieving your car, then raise that as a counterclaim. Also point out any deficiencies in the notices you were given or in the manner of sale of the car.

Do you have to pay a repossession fee?

Often charges for storage and a repossession fee are added to the balance claimed by the lender. These charges are added to the total balance owed in order to satisfy the loan. You’re required to pay this outstanding balance under the terms of your loan agreement.

How is the balance on a car repossessed calculated?

This letter shows the selling price of your vehicle, and deducts that amount from the balance owed on your loan. Often charges for storage and a repossession fee are added to the balance claimed by the lender. These charges are added to the total balance owed in order to satisfy the loan.

Can a creditor repossess a car for a deficiency?

When a creditor repossesses your car for defaulting on the loan agreement, it may then attempt to collect the deficiency balance from you. However, there might be circumstances when the creditor can’t go after you for the deficiency.