I am currently on medical leave from my job due to unforeseeable pregnancy complications. I have a car note of 255.00/mo. that I fell behind on due to my lack of employment.
The finance company calls me at LEAST 2-3 times per day demanding that I send them money, which I honestly can not do at this time. Today, they received my payment of $255.00 and called to tell me that it was unacceptable and that if I don't pay them the owed balance immediately, they will repossess the car. Can they do this despite the fact that I do send them 255.00 each month? Any help would be appreciated! Viki P
Dear Viki:
In most, if not all contracts to finance a vehicle, the creditor has a provision in the contract that states if you fail to perform any of your obligations under the contract, such as defaulting on your payments, they can repossess your vehicle. In order to redeem your vehicle after it has been repossessed, the creditor can demand you pay the balance in full. If you don't pay the balance in full after the vehicle has been repossessed, the creditor can sell your vehicle to the highest bidder.
There most likely is also a provision in the contract that says something to the effect if the creditor feels the prospect of you making future payments on time might be in jeopardy or you might fail to perform on the obligations of the contract, the creditor can demand you pay the balance in full and if you don't, they can repossess your vehicle.
So in answer to your question, yes the creditor can legally do what they are doing.
Dear Susan & Co.,
I have a situation involving a car dealership and its financial institution. The problem is this. In June of 1994 I went to get a car. I found a car, signed the paperwork and left in the car. Several days later I received a letter in the mail from the finance company apologizing for not being able to approve me at this time. I called the car lot and they told me not to worry that this happens all the time. They could still let me keep the car but the payments would increase. I quickly said no, I couldn't afford a higher payment at the time. After several days of going back and forth on this with the car lot I finally told them that the car wasn't mine, I wasn't approved and that they could have the car back. Well this is listed on my credit report as a charge off with a balance owing and I feel I don't owe for a loan that I never had. I still have the letter that was sent to me but the finance company still will not budge on their stance. Any advice you can offer me on this matter will be greatly appreciated. Thank you. Will
Dear Will:
Your mistake was in giving the car back to the dealer after you signed and took delivery of the vehicle. Even though the finance company sent you a letter saying your credit wasn't approved doesn't mean you could cancel the contract on your own and return the vehicle to the dealer. It sounds like the dealer forced the finance company to change their mind and approved your credit. The only thing you were not obligated to do is to sign a new contract at higher payments. You could have, and should have kept the car and made the payments according to the original contract you signed. If this was not acceptable to the dealer, you should have received a letter from the dealer stating you are returning the vehicle with the understanding you would have no further obligation to pay on this vehicle. Without this letter, unfortunately you now have no recourse to get this blemish removed from your credit bureau file. This derogatory notation will now remain on your file for 7 years.
Dear Susan & Co.,
I have a question that I hope you can help we with. I am currently 33 days behind on my car payment with Chevy Chase Bank. The payment was due on Jan. 9, 1999 and it is now Feb. 12, 1999. I received a letter stating that if my account was not brought up to date in 5 days that they were going to repossess their collateral. Is that possible with me only being slightly late? I went through a job change and that was the reason for the delay. Please advise me of rights and what I should do? I live in North Carolina. Thank you. Eddie
Dear Eddie:
Yes, Chevy Chase can repossess your vehicle even if you are only one day late. Normally this doesn't happen if you are only one day late but if you become 30 days delinquent, they will give serious consideration to repossessing your vehicle and they would be within their legal right to do so.
Your best course of action is to contact the bank and advise them of your current circumstances. Tell the bank you have gone through a job change. Advise the bank when you will be able to make your payment and ask that they give you a reasonable length of time to get current again
Ask the bank if you could make a "deferment payment". This is where you pay only the interest for one month.
The important point is to keep the bank informed of your circumstances. Unless you contact the bank when you cannot pay, they have no idea why you haven't paid. Good luck .
Dear Susan & Co.,
I need to terminate my car lease about 11 months early because I cannot afford to make the payments anymore. The penalty for terminating the lease early is payment of all outstanding months (10 mos. at $295 each) plus a $450 disposition fee which I cannot afford. Tell me what would happen if I decide to let the bank take the car without paying the charges. Can they force me to pay? Can they take the money from the bank? It just so happens that the leasing company is the same bank I do business with? What will happen to my perfect credit? What other options do I have? HELP. Thanks. Lourdes
Dear Lourdes:
If you don't pay what the bank says you must pay to terminate the lease early, you will be in default on your lease. If you let the bank take the car without paying the charges, you can be just about 100% sure the bank will report this account as a repossession on your credit bureau file. This derogatory notation will remain on your file for up to seven years.
If you signed a cross-collateralization agreement with your bank, your bank could possibly take money from your account. Basically, this agreement states the bank can draw on one account to pay on another account. Without this agreement, your bank cannot take money from your account. In some states, a bank has a common law "banker's lien" that permits the bank to setoff amounts in a borrower's deposit account against amounts owed to the bank by the borrower. Also, sometimes your deposit account contains language permitting such a setoff - such language need not necessarily be contained in a "cross collateralization agreement." Either way, remember that your bank can sue you for any balance remaining after terminating your lease early. With a judgment, they can take money from your account.
You might try to sell the car or have somebody assume the payments on your lease. Other than these options, I see nothing else you can do except to make the payments on the lease or ruin your credit.
Dear Susan & Co.,
When a vehicle is voluntarily repossessed is the co-signer responsible for any of the deficiency balance? Rachael
Dear Rachael:
Yes, the co-signer is responsible for any deficiency balance remaining on a repossession. The purpose of a co-signer is to ask them to pay any amount due that the primary borrower can't or won't pay. Also, this repossession will be noted on both the primary borrower's and the co-signer's credit bureau file.
Dear Susan & Co.,
I currently am under a court-imposed injunction preventing me from working in my field. My former employer filed a suit against me , keeping me from going to work for a competitor {I had a signed a non-compete}. Now I can't work and have been denied unemployment compensation and am behind on my car payment {among other things} and Nissan tells me to turn the car in! The payoff is like 37K and the value of the car is only around 25K, but I can't pay the note now and with the court system the way it is, I don't know when ,or if, I am going to be able to go back to work in my field. I live in Louisiana, can they garnish my wages when I finally DO go back to work? Thanks, Larry
Dear Larry:
Yes, Louisiana is a garnishment state and Nissan can garnish your wages in order to collect a deficiency balance on a repo. To hopefully prevent this from happening, ask Nissan if they will release you from any deficiency balance if you voluntarily return the car to them. If they won't do this, ask if they will settle for a portion of the balance (i.e.: half the balance due) if you agree to make regular installments on the deficiency balance due. If these options don't produce results, you can wait until you are served court papers and then plead with the judge for relief. Mention to the judge you tried to resolve the problem to prevent garnishment but the creditor would not cooperate.
Another alternative is to contact our affiliate Money Management International (MMI)at 1-800-762-2271 and ask to speak to a counselor. MMI offers budget counseling, debt management assistance and works with creditors to resolve a debt problem. Perhaps our counselor can help by speaking to the creditor in your behalf. Good luck.
Dear Susan & Co.,
My husband and I leased a VW Jetta in 1994. We were current on payments, but let the insurance lapse for a few months, which was a violation of our lease agreement. Although we were in the process of trying to get the vehicle insured, VW repossessed the car in 1997. They sold the car at auction for $12,000, leaving a deficiency balance of about $1500. We received notice of the sale and amount owed, but no one has contacted us regarding payments, and we have yet to contact them. We recently obtained a copy of my husband's credit report, and VW has listed the repossession, with an outstanding balance for the whole $13,500. Is this normal reporting for a repossession? I feel that the outstanding balance should be the $1500 we owe them, not the entire amount we owed before the car was auctioned off. Any information you might have regarding this problem would be greatly appreciated. We are trying to put ourselves in a position to buy a house in the next couple of years and want to resolve this issue. Thank you. Lillian
Dear Lillian:
Getting this repossession issue resolved within the next couple of years so you can get a mortgage loan is asking for a great feat. In order to be considered for a home loan, the mortgage company will require an explanation from you as to why the car was repossessed. If they accept your explanation, they will then most likely ask you to pay in full the deficiencies balance due.
You can request an accounting from VW asking them how they came up with a $13,500 deficiency balance but don't expect too much cooperation from VW. If VW insists your deficiency balance is $13,500, you have very little, if any, recourse to get VW to change this amount. You can refuse to pay this amount unless you get a full accounting of the repossession fees but this still will probably not motivate VW to act.
This repossession notation will remain on your credit bureau file for seven years from date of repo. You might be forced to wait seven year before you can qualify for a mortgage loan.
Dear Susan & Co.,
I have been working in the US for two years now, originally in CA and now in RI. We leased a '97 Jeep in CA. To keep payments down it was arranged over five years. When we moved to RI I had to lease another car so I got a Suburu, on a three year lease. Now the problem I am faced with is I am on contract work here in the US. My contract has been cut short by the company I work for. I am going to return to Europe with my family in the near future. What do you recommend for a strategy with respect to the outstanding leases on the vehicles. A friend of mine in CA had his Cherokee voluntary repossessed by Chrysler. Do you have any word on this, I would not know how to go about such a move.
Thank you for your time, Mark
Dear Mark:
You should contact the leasing companies to see what it will cost you to terminate your leases early. Another option would be to try and get someone to assume your lease payments. You will need the leasing companies approval to do this. Other than these two options, I don't know what you can do other than turn the vehicles over to the leasing companies as a voluntary repossession. When you contact the leasing company for a payoff, ask them if they can suggest any other options. Be forewarned, if you let the vehicles go back as a repossession, the leasing company can legally demand that you pay the deficiency balance that will remain for terminating the leases early. If you don't pay, they could sue you for this balance due. This repossession, and possible judgment, will be noted on your credit bureau file and will remain there for up to seven years.
Dear Susan & Co.,
My husband was laid off and I cannot afford to keep making the lease payments on my vehicle. What are the details of a voluntary repossession with a lease and what would be a better option? (The vehicle payoff is 17,000 and the vehicle is only worth about 12,000). Thanks, Lynn
Dear Lynn:
A repossession, whether it is voluntary or involuntary, will result in a derogatory notation on your credit bureau file for up to seven years. Here is the scenario of what happens. The leasing company takes possession again of your vehicle (thus the term: repossess) and sells the vehicle to the highest bidder. If the sale price isn't sufficient to pay the remaining balance due on the lease, you are legally liable for the deficiency balance. In your case, it appears as if you would be liable for at least the difference of $17,000, the payoff amount and $12,000, the value of the vehicle, or $5,000 plus repossession and legal fees, if any.
If you fail or refuse to pay this deficiency balance due, the leasing company can continue to ask you to pay and perhaps sue you in court and obtain a judgment against you.
I cannot think of a better option other than to try and continue to make the payments on the lease. If you can't, be prepared to accept the consequences.
Dear Susan & Co.,
Please give me some advice. I am trying to get a truck repossessed, but the company will not do it. I get at least two calls daily from the finance company at my home harassing me over this truck.
I bought the truck in July 97 with $300 a month payments and 21% interest. Meanwhile, the original finance company sold the note to another finance company out-of-state. In December 97, the transmission died. I cannot afford the $1500 to fix/replace the transmission and pay the truck payments.
When I bought the truck, I had a $10 per hour job, but lost that job a month later, and had to settle for a $6 per hour job. Right now, I also have attorney fees to pay on a different problem, so I can't afford any vehicle for awhile.
What advice can you offer me? I have tried to voluntarily have them repossess it and they won't. They prefer to harass me and argue with me on the phone. Also, is 21% interest on a vehicle loan legal in the state of Texas? I would appreciate any help you could give me. Thanks, Mike
Dear Mike:
The finance company can continue to call and ask you to pay. The only thing they can't do is harass you. State and federal laws prohibit the use of harassment or abusive collection tactics. What constitutes harassment would be up to the courts to decide.
Even if the finance company repossessed your truck, they could still call you and ask you to pay the deficiency balance remaining. This occurs after they sell your truck to the highest bidder and apply the proceeds to your balance. There most likely will be a balance remaining which you are still legally obligated to pay.
In answer to your question is 21% interest on a vehicle loan in Texas legal. In Texas, the interest rate on a vehicle installment contract is based on the year model of the vehicle. On older vehicles, the interest rate could be as high as 25% APR.
Dear Susan & Co.,
I would what like to know what happens to the owner in the event of a repossession. I have reached the point where I can no longer handle a large car payment, and may have to allow my car to be voluntarily repossessed. Thank You. Roy
Dear Susan & Co.,
Recently the Ford Company repossessed my car. What do I need to do? They are going to ruin my credit. As an additional problem, I recently lost my job... Thank you in advance. 810990
Dear Susan & Co.,
In 1991 I purchased a new vehicle. I then moved to California (I am in the military), approximately one year later I was again transferred. I tried and tried to make payments as required. I finally decided to sell the vehicle to avoid any more problems. I was continuously called on the phone by collectors asking for payments. Finally it came they demanded that I give them the balance or the truck. I decided to give the vehicle up as a voluntary repossession. I was under the impression this was not as bad as an involuntary repossession and it would not reflect unfavorably on my credit report.
They sold the vehicle at an auction. I ended up owing $6,500. I began to make electronic monthly payments. Approximately six months later the payments suddenly stopped. I was given no explanation as to why this occurred. I was again contacted by another agency asking for the money. I informed them I would send them a payment in the same amount. They told me this was unacceptable and would not accept my payments.
In the meantime, I am trying to buy another vehicle. I wrote the 100 word letter explaining the situation and sent it to the credit reporting agencies. To date, neither that letter nor the code for a letters shows up on my report. What exactly can I do to get this information removed from my report. Scott
Dear Scott,
In your letter, you mention that you were making electronic payments to a company which suddenly stopped. This would indicate that the company went out of business and was replaced by a second company.
The second company, apparently, has a different set of policies. It is my understanding that no collection agency can refuse partial payment of a debt.
My first suggestion is that you send the payment that you had been making to the first company to the new company that is attempting to collect the debt. If they send it back, simply send the returned check with another monthly payment the next money. Eventually you should have an amount which is too large for the collection agent to ignore.
This will also provide you with a legal defense should you ever need it. It will also show your military supervisors that you are acting in good faith.
On a credit report, a repossession is a repossession. Lenders want to make loans to people who pay their bills. The only way that you can clear this is to pay it. Removal from the report is not really practical. It is a fact that you had a repossession. It is a fact that you owe the money. This is called a deficiency balance.
To purchase another car, you will have to find a lender who is willing to loan to someone with less than perfect credit. You can expect to pay a larger down payment, have a larger note, and shorter repayment period. If you have proof that you are paying the bill, present that proof to the dealership. This can make a difference in consideration of your application.
If you were in the military in 1991, you may be eligible for the Soldiers and Sailors Relief Act. This says that if you were called back to active service and this created a financial hardship, you can apply for relief and make new payment arrangements. Remember, this only applies if you were called back, not if you were on active duty.
Good luck and thanks for writing.
Dear Susan & Co.,
I live in California. I need to know if a credit card company can repossess or seize items from my home. Do they need to obtain a debtors judgment first? Can they just show up out of the blue and load up their trucks with everything I own? Can they seize specific items that I purchased with the cards? I am behind on my payments and frankly afraid of losing everything I have.
Thanks, Eric in LA
Dear Eric,
According to the California Code, Section CC1812.5, a lender cannot repossess any consumer goods except motor vehicles without a court order. If the lender repossesses any non-motor vehicle consumer good after obtaining a court judgment, you cannot be held liable for any deficiency judgment. (Many thanks to Larry Womack of CCCS in Santa Clara, CA for researching that point.)
While your creditors need a court order to repossess, bear in mind that items left lying around the yard might be considered fair game.
As for credit card companies repossessing goods, the major credit card lenders I called said their usual method of recovery is through collection agencies rather than repossession.
Meanwhile, for some peace of mind, call 1-800-388-CCCS to find the Consumer Credit Counseling Service nearest you. It's possible a counselor can help you develop a repayment program that is livable for you and acceptable to your creditors. You won't know if you don't go.
Many thanks for writing and good luck.