Repossessions: What is a deficiency judgement?

A deficiency is the difference between what is owed on the vehicle and what the lender sells it for. Usually the vehicle is wholesaled at an auction and the buyer may be subject to a lawsuit for the balance. The Automobile Sales Finance Act governs the process. It requires the lender to follow a very specific procedure to pursue a deficiency judgment. If the lender fails to follow the statute, the consumer does not owe the money.

The deficiency judgment is the result of a lawsuit. If you get served with legal papers you should immediately contact a lawyer. You will have only 30 days in which to file an answer. If you do not file an answer the court will assume that you have no defenses and you will lose by default. The result maybe that you end up with a default judgment saying a large sum of money that you really do not owe. The repossession and the deficiency judgment will go on your credit report making it difficult to buy another car, get credit, rent an apartment, even get a job. Many employers check credit reports before hiring.

The sale of the car has to be "commercially reasonable". That means that if they don’t conduct a fair sale, then they cannot hold you responsible for the deficiency.

After repossessing your car in California, the auto finance company was required to send you a letter called, a NOTICE OF INTENT TO DISPOSE OF VEHICLE. They may call it something different like NOTICE OF OUR PLAN TO SELL YOUR PROPERTY (the car). Whatever they call it, the letter is very important. If it does not comply with the Automobile Sales Finance Act, they are not entitled to a deficiency judgement at all!

That letter is the most important piece of paper in the whole process. DO NOT THROW IT AWAY OR LOSE IT. If you no longer have it or they did not send it to you, call the lender and ask them to fax you a copy. The finance company must comply with the repossession law. If they do not, they may have committed "conversion" by selling your car, and they may be liable. You can fax the NOTICE OF INTENT to this office at 1 (858) 270-7710 or you can scan and email

Many lenders sue and get deficiency judgements that they are not entitled to. To find out if this is what is happening to you, call us.

 

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The Law Office of Michael E. Lindsey
Tel: (858) 270-7000 Fax: (858) 270-7710