How Auto Repo Deficiency Works
When your car is repossessed, the lender sells it -- usually at auction. If the sale price is less than what you owe (plus repo fees, storage, and auction costs), the remaining amount is the deficiency balance. For example: you owe $15,000, the car sells for $8,000, and the lender adds $2,000 in fees. Your deficiency balance is $9,000.
The Commercially Reasonable Sale Requirement
Under the UCC (Uniform Commercial Code), the lender must sell the vehicle in a commercially reasonable manner. They cannot dump it at a below-market auction or fail to advertise. If the sale was not commercially reasonable, you can challenge the deficiency amount or eliminate it entirely.
Your Right to Notice
The lender must send you written notice before selling the vehicle. If the lender failed to provide proper notice, many states allow you to offset the deficiency or eliminate it entirely. Check your state's UCC adoption for specific requirements.
Frequently Asked Questions
Can the lender come after me after repossession?
Yes, in most states. After selling the vehicle, the lender can file a lawsuit for the deficiency. They must first obtain a court judgment, then they can garnish wages and levy bank accounts.
How long after repo can they sue for the deficiency?
The statute of limitations varies by state, typically 3-6 years from the date of default or sale. Do not make any payments on an old deficiency, as this may restart the clock.
Can bankruptcy eliminate an auto repo deficiency?
Yes. An auto repo deficiency is unsecured debt and is fully dischargeable in both Chapter 7 and Chapter 13 bankruptcy.
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