Vehicle Deficiency Claims and Bankruptcy
Lawsuits by automobile finance companies to collect deficiency claims often serve as the reason families end up in bankruptcy. If you have had the bad fortune of losing your car or truck to a repossession, you not only lose your transportation, but there is a good chance that the vehicle finance company will sue you for the difference between the auction sale price and the amount remaining on your contract.
Because cars and trucks are “depreciating assets” (in other words, vehicles lose value each month as they get older), there is a good chance that you are “upside down” on your vehicle loan until the last year or so of your installment sales contract. This is especially true if you entered into a five year loan contract.
If you miss payments because of a family emergency or unexpected loss of income, your contract may go into “default” status. Under Tennessee law, vehicle finance companies have the right to repossess your vehicle, and, after following certain State laws, sell it at the auto auction.
After the vehicle has been sold, it is too late to try to get it back. If your vehicle has just been repossessed, please call our office immediately as we may be able to use the power of the bankruptcy laws to get it back.
What Happens Immediately After a Repossession?
If your vehicle has been sold, you will likely receive a “demand letter” from the finance company ask you to pay a large lump sum. You will very likely find that your vehicle did not fetch more than a wholesale value at the auction. Further, the demand for payment may very well include charges for penalties, interest, storage charges and other fees. Do not be surprised if the deficiency demand totals hundreds or even thousands more than you thought you owed.
It has been our experience that vehicle finance companies can be very aggressive in pursuing recovery of their deficiency claims. Most of these finance companies keep lawyers on retainer who routinely sue customers like you for deficiency balances.
As is the case with any lawsuit, you need to take action immediately if you receive a lawsuit. If you fail to respond to the lawsuit, the case against you will go into default and the plaintiff vehicle lender will get a default judgment. With a default judgment in hand, the lender can garnish your wages, levy your bank account and place a lien against your house.
How Clark & Washington Can Help You Solve
a Repossession Problem
Clark & Washington can help you at any stage of this process. If your vehicle has just been repossessed, we can often get it back for you using a Chapter 13 repayment plan. Bankruptcy judges recognize that reliable transportation is necessary if you are to earn the money necessary to pay your Chapter 13 plan and we can argue that the terms of your repayment plan are sufficient to protect the interests of the vehicle lender.
If the vehicle has already been sold or if you want to give up your claim to the vehicle, we can include the deficiency claim as an unsecured debt in a Chapter 7 or Chapter 13. As an unsecured claim, the deficiency balance would be treated as the lowest category of debt - similar to the way credit cards are treated.
If a judgment has been issued against you we can stop the wage garnishment and, in some cases, terminate the judgment lien.
If you have lost a vehicle to repossession or are facing a possible repossession, call us for free advice about your options.
Remember: if you have ANY questions, please do not hesitate to call us for a free telephone
consultation at 865-977-0121.
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