Auto Deficiency Claims

Creditor must notify debtor of repossession

And conduct all proceedings in a commercially reasonable manner

Creditor must comply with Texas Business and Commerce Code §9.610

In an suit for an auto deficiency, once the issue is raised by the Debtor in its response to the Court, the Creditor must prove that it complied with the law in the manner it handled the repossession and disposition of Debtor’s vehicle.

Creditor must prove its actions were commercially reasonable

The duty to dispose of collateral in a commercially reasonable manner is an implied covenant in all contracts. The burden of pleading and proving commercial reasonableness is upon the secured party. Establishing the commercially reasonable disposition of collateral is a condition precedent to a creditor’s recovery in a deficiency suit.

The creditor must plead specifically or aver generally that all conditions precedent have been met.

If a commercially reasonable sale did not occur, there is a breach of contract by the Lender. A creditor who elects to sell the collateral must both give notice and sell in a commercially reasonable manner.

A secured creditor must choose: retain the collateral or sell the collateral in a commercially reasonable manner

Lender’s failure to comply with Article 9 bars creditor from recovering any deficiency

Business and Commerce Code §9.611 & 9.612 [previously 9.504(c)] requires a secured party to give reasonable notice of the time and place of any public sale or time after which any private sale or other intended disposition is to be made.

Per §9.613, notification with regard to a consumer transaction must include:

  1. description of debtor and the secured party;
  2. description of collateral;
  3. method of intended disposition;
  4. notice that debtor is entitled to an accounting of the unpaid indebtedness
  5. time and place of a public disposition or the time after which a disposition will be made;
  6. description of any liability for a deficiency of the person to whom notice is sent;
  7. telephone number from which the amount that must be paid to the secured party to redeem the collateral is available;
  8. telephone number or mailing address from which additional information concerning the disposition and obligation is available.

Defending the auto deficiency suit

  1. Plead affirmatively that all procedures were not conducted in a commercially reasonable manner.
  2. Plead affirmatively that debtor did not receive the post-repossession required notices.
  3. Absence of post-repossession notices not only prevents the creditor from recovering a deficiency but provides a debtor with an affirmative claim.

Business & Commerce Code §9.625 provides the Plaintiff a remedy for Defendant’s failure. Section 9.625(c) provides as follows:

  1. a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under Subsection (b) for its loss; and
  2. if the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this subchapter may recover for that failure in any event an amount not less than the credit service charge plus 10 per cent of the principal amount of the obligation or time price differential plus 10 per cent of the cash price.

If your car is repossessed:

  • Keep copies of all correspondence you receive from the lender
  • Keep records of all payments
  • If you make any agreement with the lender about payments, confirm the agreement in writing
  • Keep copies of your contract and purchase documents
  • Retrieve your possessions from the car (do not sign a release)
  • Make sure the lender has your current address
  • Contact an experienced consumer litigation lawyer to evaluate your claim