A bank or other lender that won't settle after repossessing your car may simply be positioning itself for a better offer from you. The bank may simply feel you have not made a reasonable offer to settle a so-called "deficiency balance." The deficiency balance is the amount remaining on your auto loan after the repossession. The amount is determined after the bank sells your car at an auction or through a private sale. Example: The balance on your auto loan was $10,000 when the car was repossessed, but it sold for only $6,500 at auction. That leaves $3,500 plus repossession fees remaining, and the bank wants that money from you.
Legal Representation
The bank can file a lawsuit against you for the deficiency balance, and that can result in a civil judgment ordering you to pay the full amount. If you fail to pay, the bank can return to court to request a written court order allowing the bank to garnish your bank account or wages for the amount that you owe. The threat of a judgment or garnishment means you should seek the advice of a credible consumer affairs attorney. The attorney can advise you about your legal rights and help you prepare to defend yourself against a lawsuit, if necessary. Ask for free help from your local chapter of Legal Aid if you cannot afford an attorney on your own.
Federal Law
The lawyer can determine if the bank followed the law as it sold your vehicle and determined the deficiency balance. The Federal Trade Commission reports that the lender must sell a repossessed vehicle in a "commercially reasonable manner." That means the lender cannot sell the car for a price that is far below fair market value and then expect you to pay an unreasonable balance.
Opening Negotiations
A letter from your attorney offering to reach a fair settlement will indicate to your bank that you are serious about resolving the issue. The attorney can challenge the lender on the selling price of the car, and argue that the price was not fair. It doesn't matter if the price was fair or wasn't. The tactic can be used as a negotiating ploy by the lawyer as he tries to negotiate a fair settlement.
Written Documentation
The attorney should provide you with written documentation of the settlement that is signed by an officer of the bank. The settlement should detail the entire agreement, including how much you are required to pay and when. The settlement should also indicate that you will not be sued as long as you pay the amount agreed.
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