Vehicle Repossession in Florida

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If your ride has been repossessed and sold by the lender, you may get a letter from the lender saying you still owe money on the vehicle loan and demanding payment. It doesn’t matter that you may have politely delivered the vehicle and keys to the lender without a fight. A "voluntary repo" counts the same as an ordinary repo except for the towing expense. Few things are as frustrating as being forced to make payment on a car or truck payment you don't even have any more!

The reason you get a letter asking for more money after the repo sale is that the lender didn't get enough money from the sale to pay off your loan balance. The amount still owed after the repo sale (the "deficiency") is often in the range of $4,000-$10,000 and can go higher. If you don't pay the deficiency, the lender will usually take you to court where cases are almost always skewed in their favor. Banks hardly ever lose a lawsuit on the deficiency so a significant judgment is entered against the borrower.

Should I File for Bankruptcy?

Repo debts are one of the leading reasons that people file for bankruptcy. In a normal Chapter 7 case, the debtor never has to pay back the repo debt even if the lender has gone to court and obtained a judgment for the repo balance.

• That's the short version. The details of a vehicle repossession in Florida begin with the following:
• You buy a new car or truck and finance it through a bank, credit union, or auto finance company.
• You run low on funds and miss payments.
• One day, you go outside to start your car, but it has vanished. Your ride has repossessed (or "popped").
• You get a letter, telling you the obvious, that your vehicle has been repossessed, and giving you 3 to 10 days to pay off the entire loan balance, failing which the bank will sell the car.
• Unable to make even the regular payments, you are unable to pay off the whole loan by the deadline.
• The bank hires someone to wash and wax your car, perhaps even repair it, and then sells it for an unbelievably low price, often to a used car lot or at an auto auction where attendance is limited to car dealers.
• The bank increases the loan balance to cover the cost of the towing, storage, clean up and repairs. The bank then subtracts from this balance the amount your car sells for. Since the car usually doesn't sell for enough to pay off the entire loan, there is still a balance owed. This remaining balance, after crediting you with the sale proceeds of the car, is called the "deficiency" amount and you are expected to pay it.
• The bank then sends you another letter demanding payment of the deficiency amount and, if you fail to pay that, they file suit in court to collect it. The court backs up the bank and enters a final judgment against you.
• Now you find yourself in the unhappy circumstance of still owing on a car you don't even have. The deficiency amount is, as stated above, often above $4,000.00 and can go higher.

Why Did the Bank Sell My Car So Cheaply?

This is the big issue in repossession cases, but the courts almost always side with the banks. In all fairness to banks and credit unions, they have a bit of a problem when they repo a car. On the one hand, banks actually do want to sell your car for as much as they can. After all, they get to keep whatever they can get from the sale and apply it against your loan balance. On the other hand, banks are not really in the car sales business, they are in the car loan business. Selling the car may seem simple, but the banks are faced with three problems: selection, security, and time. Fewer potential buyers means lower demand and lower prices. No matter how you slice it, a repossessed car doesn't sell for top dollar.

Aggressive Collection Measures

Banks and credit unions will not ignore the deficiency balance, so they will sue you or hire a lawyer to do so. Banks don't have much choice. If they fail to sue you, the government bank examiners will give the bank officers grief for not being vigilant in collecting their debts. The end result is you being sued for a lot of money you don't have for a car you can no longer drive.

How Bankruptcy Impacts an Auto Deficiency

What happens to the deficiency balance in a bankruptcy case? Deficiencies from auto loans are no different from other unsecured debts (the security, the car, has exited stage left) like credit cards and medical debts. As a result, in a normal Chapter 7, the auto deficiency debt is forgiven or "discharged." Even if the bank has obtained a judgment against you, the debt is forgiven.

Ready to discharge your debt? Ruff & Cohen can help. Call our Jacksonville bankruptcy lawyers at (352) 376-3601 today!