How Does Deficiency Balance after Auto Repossession Work?

Having a car repossessed is one of the worst feelings in the world. It feels like your entire life changes once your transportation is gone. It is bad enough to lose your automobile, but to find out that the lender is demanding a deficiency balance after auto repossession feels like getting kicked when you’re down. Deficiency balances can also come into play with other secured types of loans in which property is involved, such as homes, boats, and other salable items. Either way, if you thought repossession was the end of the problem, it can come as a shock to have a collection action initiated or even a court judgment rendered against you.

Repossession in Florida

Repossession in Florida is governed by state law. Several things have to happen before a repossession can be said to be legal, including:

The creditor is required to give the better a chance to turn in the property.
The creditor must allow the debtor a chance to remove their personal property and belongings before taking possession of the property.
The creditor has to dispose of the property by sale through a licensed motor vehicle dealer.
The creditor must inform the debtor of the date and time of the sale as well as the location at least 10 days before it occurs.
The creditor must provide the debtor with an accounting of the principal owed, and interest accrued through the date that the creditor took possession and reasonable expenses incurred in that process.
The creditor must allow the borrower to redeem the property with a money order or certified check for the principal, interest, and expenses incurred by the creditor. The creditor must allow this at any time prior to the sale.
The debtor must – within 30 days after the sale – receive proceeds from the sale in excess of the amount due less the costs of preparing for sale and selling the property. If the creditor does not convey the proceeds, then the debtor is entitled to attorney’s fees and costs to recover the proceeds.

Also provided for in Florida law is the act of issuing a notice of deficiency balance after auto repossession. The creditor can issue a notice, initiate collection action, or go to court to get a judgment that will require you to pay or have your wages garnished. However, it is a little-known fact that if your deficiency balance is less than $2000, you are not required to pay.

When Do I Have to Pay a Deficiency Balance after Auto Repossession?

State law provides for limitations on deficiency balance claims. When the deficiency is $2000 or more, then the creditor is entitled to collect that balance. However, that is only when the fair market value is deducted from the unpaid balance due. Unfortunately, some creditors will try and recover amounts under $2000 or sell the debt to a debt collection agency. There is nothing preventing them from going to court and trying for judgment. If you receive a summons to appear in court and answer the lawsuit, don’t ignore it. That is the worst possible thing that you can do, even if you know you do not own the debt.

What Can I Do to Stop It?

If the original creditor is the one trying to collect the deficiency balance after auto repossession, inform them of state law that exempts you from paying if you owe under $2000. Whether it is the original creditor or collection agency, make them present their case to you in writing, detailing how they arrived at the deficiency balance. By federal law, you have a right to verify the debt under the Fair Debt Collection Practices Act.

What if I’m Being Sued?

If you receive a summons, don’t ignore it. Instead, show up with all of your documentation and prove to the court that you owe less than the $2000 mandated by the state. This way your creditor cannot receive a default judgment and use that to garnish your wages. If you receive a notice of default judgment, it is within your right to appeal the judgment. However, instead of acting pro se, a better decision is to retain an attorney who understands the intricacies of Florida law to represent and protect you.

Debt is Crippling

Very often, an auto repossession is a symptom of a much larger problem with debt. If you are having issues with paying your bills and reading everyday living expenses, then you owe it to yourself to get the best financial and legal advice possible. It is possible to consolidate your debts, renegotiate debts, or even to file for bankruptcy to get out from under debts that exceed your assets. Bankruptcy is not the B word, but instead is a constitutionally protected method for debtors to find relief. If you are unable to keep up and your debts are placing your vehicle in danger of repossession, it’s time to sit down and figure out your best possible way forward.

Get Help!

When it comes to debt, judgments, deficiency balance after auto repossession, or even bankruptcy, you need an experienced attorney on your side. If you are facing repossession and are thinking of bankruptcy, there may even be a way for you to keep your vehicle. Van Horn Law Group and founding partner Chad van horn are here to help. Our offices in West Palm Beach and Fort Lauderdale are open seven days a week, and your initial consultation is free. Come see us, bring all of your paperwork and documentation, and let us offer our best legal advice on how to deal with your debt. Whether it is student loan debt, credit card debt, medical debt, or a combination of all three, it doesn’t have to take over your life. We can help you get back on track and live a life that is debt-free.

The only thing you have to lose is the stress of juggling all those payments. Call today!