In fact, repossession sales are often attended only by used car dealers, who have a motive to keep the bids very low.
This is one reason why most property sold at repossession sales brings in far less than the lender is owed. And even though you could have sold the item for much more, the sale usually will be considered "commercially reasonable.
After the item is sold, the sale price is subtracted from what you owe the lender. Then, the cost of repossessing, storing, and selling the property is added to the difference. Very often, you're liable for that balance: the deficiency balance. Here's one suggestion for avoiding a deficiency balance: If your property, especially a motor vehicle, is about to be repossessed, ask for a contract reinstatement just to get the vehicle back so you can sell it yourself.
Some lenders will forgive or write off the deficiency balance if you clearly have no assets. If the lender doesn't forgive or write off the balance, expect dunning letters collection letters and phone calls, probably from a collection agency. In about half of the states, you won't be liable for a deficiency balance on certain kinds of transactions or if the amount still owing or that you originally paid is less than a few thousand dollars.
The rest of the states don't place any limits on deficiency balances after repossession. It's common for creditors to make mistakes in the repossession process. Most states bar creditors from collecting a deficiency balance if they fail to comply with notice requirements—such as notifying you of the right to cure or of the sale—or didn't sell the property in a commercially reasonable manner.
If you think the creditor made a mistake, you must raise this defense at the time you're sued for the deficiency balance. Because these cases can be complex, it's a good idea to consult a lawyer.
Just as with involuntary repossession, you have to pay the difference between what the car sold for and what you owed on the loan. Voluntary repossession, a type of loan default, will stay on your credit report for seven years.
That type of negative mark will harm your scores — especially your automotive-specific credit scores, which will determine the interest rate you pay on your next car loan. Once seized, your car will probably be sold at auction.
If your car sells for less than you owe, you may be sued for the difference, known as a deficiency, plus any applicable fees. You can sometimes reinstate the loan and work out a new payment plan, too. The repossession may not be removed from your credit report in these situations, but your new payments will generally be reflected if you make a deal with your lender but not if you buy the car back at auction. Before getting your car back, think through these questions:.
If you got your car back, would you be able to afford insurance, maintenance and gas? Neglecting important repairs or getting into an accident while uninsured may land you in an even more difficult financial situation.
Do you have access to affordable public transportation or a carpool? Getting to work by bus or other means may be a better option than reinstating your loan or paying your balance and repossession expenses in full. Do you plan to declare bankruptcy? Jenny buys an alarm system for her car, which was listed as security under a loan.
If Jenny gets behind in her loan payments, the creditor can repossess the car which includes the alarm system , because the alarm system is installed in the car and forms part of the security.
Hoani buys a few items of household furniture on finance. The finance company does not list all the items individually on the credit contract as required, but only states "dining room table and chairs, lounge suite etc". If they repossess items not listed in the contract, Hoani can report them to the Commerce Commission, and may be able to get help from Community Law.
When she returns home, Sally is horrified to see the door is broken and open. On advice, she makes a complaint to the Commerce Commission about the repossession. She can also complain to the lender to get compensation. If it is not resolved satisfactorily, she can go through the Dispute Resolution Scheme that the lender belongs to. Sione buys a car second-hand off a website. He checks the car out in person before finalising the purchase, but doesn't do a check on the Personal Property Securities Register to make sure there's no money owing on it.
A few months later, the car is repossessed by the company who sold it to the previous owner, who owed money on it and had not been making payments. On this page. They might repossess products you: bought on credit formerly called hire purchase or HP listed as security under a loan contract secured loans , eg a personal loan, bank overdraft or mortgage.
Before you buy Before you buy products or services on credit or take out a personal loan, find out what will happen if you can't pay. Your rights Lenders repossess items so they can repay your credit contract by selling the products or property they repossess and using the proceeds to repay your loan.
Lenders can repossess items from you when: your credit contract gives them the right to repossess an item, and to enter your premises to make the repossession, and you have defaulted, according to the terms of the credit contract or breached the credit contract in some other way or the lender has reasonable grounds to believe the items will be destroyed, damaged or removed, and the lender is registered as a financial service provider.
What can be repossessed A lender can only repossess items after you entered a credit contract when: you have specifically agreed to add those products as security you have sold the original secured items and bought other things with the money or with the money you borrowed from the lender you bought products that have been installed in or fixed to products which are listed as security.
The lender must cause the least amount of damage or inconvenience to you when they remove these items are subject to a purchase money security interest PMSI , which means that money was borrowed to buy those particular items and the creditor has registered their financing statement within 10 working days of your possession of the items. There are various options for dealing with this debt. They are small text files.
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What happens when a lender sells your home.
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