Consumer Myth #4 – When your car is repossessed, whether voluntarily or involuntarily, you have no further obligation of payment.
Written by Sharon K. Campbell

It is a rare instance when there is no further obligation after a car is repossessed. First, whether the repossession is voluntarily or involuntarily makes no difference in whether additional sums are owed. Also, a bank or finance company has the same duties under the law whether the repossession was voluntary or involuntary. If a car dealer tells you that turning in a car will end your obligation, do not believe him. It is not the car dealer (unless it is a buy here pay here lot) who will be making the decision. It is a repossession agent of the finance company or bank who repossesses your car and who handles the matter from that point forward. When you signed the contract for the purchase and financing of your car, you agreed to pay a certain amount for the car, generally the purchase price plus the finance charges. The finance company is entitled to the entire sum. So, when you default on the contract and the bank or finance company repossesses your car, they are entitled to recover the full amount. [There is an exception when the bank or finance company offers to keep the car in full satisfaction of the debt. There are procedures which must be followed for this to occur. Most likely to be used by a buy here pay here lot].

The bank or finance company must let you know the car has been repossessed so you may retrieve any personal possessions that were left in the car. Then, within a reasonable time, they must send you a letter telling you that they are going to sell your car, either by public or private sale, on or after a date at least 10 days in the future. They must give a phone number you can call to obtain the full amount owed. Most finance companies will accelerate the debt at repossession, meaning the entire balance of the note is due, not just the past due payments. You have until the date listed on the letter to pay to redeem the vehicle. If you don’t, the bank or finance company may proceed to sell your car. They are required by law to handle everything in a commercially reasonable manner. The amount received from the sale will be credited against the balance of your note and you will still owe the balance. There is almost always a balance. In Texas, the statute of limitations to file suit on auto deficiency claims is 4 years. If the bank or finance company does not follow the proper procedures, they may be prohibited from collecting the deficiency and you may have a remedy against them.

If you think the bank or finance company has not followed the procedures described above, please contact us to discuss your options.

Sharon K. Campbell, Attorney at Law
3500 Oak Lawn Ave
Suite 110
Dallas, Texas 75219

Phone: 214-351-3260
Fax: 214-443-6055

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