The physical repossession of a car is much easier than an eviction or a foreclosure. In most finance agreements or lease agreements, the lending company has the right to repossess your vehicle if you miss your monthly payments. We all know someone that has had a car repossessed. The towing company finds the vehicle somewhere and next thing you know, your car is gone. They may have found your car at your house, at the mall, at work, or tracked it with the GPS device that some dealerships place on your vehicle without your knowledge.
Most people that have a car repossessed are not surprised. They know they missed their payments and played “cat and mouse” games with the repossession company and the lender. However, what most people do not expect is what may happen next, usually in the following order:
1. An attempt to make a claim against your insurance on the car.
2. A notice of sale of the vehicle that is vague on the place and time.
3. A notice of a deficiency amount (the amount due after the sale of the car that reduces the principal amount due).
4. A lawsuit seeking the amount due after the sale of the car.
Consider the following facts that accurately reflect a couple recent cases I have been involved in, but all information is changed to protect attorney-client privilege.
Jane Smith has a 2005 vehicle that she financed for $10,000 as a new car. In 2009, she could not continue to make her payments. She owed $3,000.00 and the car was kept in great condition. The miles were very low. If she would have sold the vehicle to a private party at the time of repossession, she could have received $6,000. This is probably all the information Jane Smith would have known on the day the car was repossessed. The car was repossessed at a mall with tight parking spots.
What now? Before anything else, save every piece of paper you get from the lender.
Unless you are absolutely certain that the car was repossessed, call the police in case it was stolen.
Second, and other attorneys might disagree, call your insurance company and let them know that the car may have been stolen or repossessed. Let them know the condition of the car the last time you drove it. Too many times the “repo man” will cause damage to the vehicle (serious damage) including damage to the drive-train or the body. You want to do what you can to cut off your insurance liability. I have had clients call claiming that their insurance company received a claim for a massive amount of body-work and it was ultimately discovered that the towing company caused the problem.
Next you need to find out what company towed your repossessed car. You probably have personal belongings in the vehicle that you want returned. You can call your lender and find out whom they contracted with. I had one client that had his wallet in the vehicle and needed to get it back as soon as possible. The tow company was willing to comply.
AFTER DAY ONE AND BEFORE SALE
The lender is required to send you notice of the sale of the vehicle. The lender must sell the vehicle in a commercially reasonable manner. While you may not want the lender to know your address, I would highly suggest updating your address for the notice of sale. This may be one of the most important aspects of your ability to avoid a debt to the lender.
Additionally, after the sale takes place the lender is required to send you a notice of deficiency (if the sale price was less than the amount owed) or surplus (if the sale price was more than the amount owed). When you receive this you should note the amount the vehicle was sold for and compare it to the fair market value of the vehicle.
In our hypothetical case above, Jane Smith received a notice that she owed $3,000. She also received notice that her car would be sold, let’s say, before or after April 1, 2009. Hopefully her notice states in what manner the car will be sold (private or public). If Jane Smith really wants to protect her rights, she should demand to know the exact date and time. She has the right to purchase the vehicle and to know the details of the sale.
What happened in our Jane Smith’s case is that the vehicle was sold for about $500 for one reason or another even though its sale value was $6,000 in a private transaction. Even worse, at a wholesale auction, the vehicle was still worth $4,000.
DEFENDING THE LAWSUIT
So now Jane Smith has her car repossessed, sold for $5,500 less than what it is worth, not sold in a “commercially reasonable manner” and is now being sued for a $2,500.
Do not take the lawsuit at face value. Even if you did not take notice of the sale, the previous demands, or anything else after the repossession, take a moment to reflect on what is really going on. Our Jane Smith just got sued for $2,500 for a car that she only owed $3,000 on and knew it was worth $6,000. The lender also added in attorney’s fees, costs, and interest. Our hypothetical clients, called collectively Jane Smith, almost did not come in to discuss their case. They were simply going to let a judgment go against them when they can prevail (one did, the other one is still pending).
There are a lot of incentives for attorneys to take these cases for you at little or no cost. Specifically, if the attorney can prove that the bank did not sell the vehicle at a commercially reasonable value, that attorney can often recover your attorney’s fees against a party that is solvent (i.e., a bank…it shouldn’t get more solvent than that).
The best way to avoid repossession is to pay your car debt. However, if you are facing repossession, and it is inevitable, take pictures of your vehicle, save your maintenance records, keep the mileage records, and demand updates and paperwork after the repossession. If the math works out that the vehicle can be sold for more than it is worth, or even remotely close, it is a case that many attorneys would be interested in.