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Car Repossession and Deficiencies

A person whose vehicle gets repossessed may still owe money on the auto loan— a repossession does not always “wash their hands” of the loan. To understand why requires understanding what happens after a vehicle gets repossessed.

After a lender repossesses a vehicle, they set a date to auction it off. From the date of the borrower’s last payment on the account to the date of the auction, the loan accrues interest and late fees, which can significantly increase its balance. When the vehicle is finally sold at auction, the amount it sells for gets subtracted for the outstanding loan amount. There may be some money still due because of the interest accrued before the sale, and because vehicles (especially new vehicles) depreciate fast and may not sell for very much compared to the purchase price. The amount left over is called a “deficiency.”

Auto loan deficiencies can remain on a person’s credit report for seven years after the date of the auction. As far as collection goes, if the vehicle was financed by the dealer, a lender or collector can sue for the deficiency for four years after the auction. For vehicles that were purchased with outside financing, the limit on a lawsuit is six years.

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​Drewes Law, PLLC
1400 Van Buren Street NE
Suite 200-238
Minneapolis, MN 55413
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​​General Line: (612) 285-3051
Email: info@dreweslaw.com

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