Tag Archives: vehicle

What you need to know about Auto Loan Deficiency Balances

If you are delinquent on your vehicle loan or your case has been seized and auctioned off, it is time to seek legal help. We can review your individual circumstances and help you understand all of the debt relief options available to you. The quicker you contact us, the sooner we can provide you with the help you need.

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What is a deficiency balance?

You are probably aware that your vehicle starts to lose its value as soon as you drive it off of the dealer’s lot. Thus, when your auto lender repossesses your care and sells it, the proceeds from the sale are rarely enough to pay the full amount of what you owe on the loan. This means that there is a deficiency balance left due and you are usually still obligated to pay it.

How does the auto auction work?

Each state has its own laws governing how secured lenders can sell repossessed collateral. Generally speaking, the lender is typically required to provide you with a written notification that your car will be sold. The notice will list the date, time and location of the auction or other type of sale. The borrower should also be informed of whether he or she will remain liable for any remaining deficiency balance, as well as how the borrower can find out how much is still owed on the loan.

Asset sales can be private or open to the public. A private sale is conducted for certain parties who the lender believes will be interested in buying the collateral being sold, while a public sale is open to anyone. Private sales are only allowed in certain circumstances, but many cars are routinely sold at private sales to auto dealers. If the sale notification fails to inform you of the date or location of the sale, you should contact the lender and request that the information be given to you. A borrower has the right to attend either type of sale of his or her own vehicle.

What does “commercially reasonable” mean?

The lender must sell a repossessed vehicle in a ‘commercially reasonable’ manner. There are numerous interpretations of this standard, but because most car sales are primarily attended by used car dealers, the bids are low and the sales are still considered to be commercially reasonable. This means that most borrowers are left owing a pretty substantial deficiency balance.

How is the deficiency balance calculated?

When the sale has ended and your case has been sold, the sale price is subtracted from the total amount you owe on your vehicle loan. The remaining amount plus the expenses incurred by the lender in seizing, storing and selling the vehicle are added together for the total deficiency balance.

If you have questions about your auto loan or a deficiency balance, we have the answers. Call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.

Speak with an experienced Attorney at Faro & Crowder, PA 321-784-8158

We offer a free initial consult for foreclosure defense or bankruptcy.

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Faro & Crowder, PA
Phone: 321-784-8158
Address:
1801 N. Sarno Road, Suite 01
Melbourne, FL 32935
Email: info@farolaw.com

We are a debt relief agency. We help people file for bankruptcy under the bankruptcy code.

Car Cramdowns in Bankruptcy

Most consumers owe more on their car loan than their vehicle is worth. If you are also overwhelmed by other debt and you have a regular source of income, it may be time to consider filing a Chapter 13 bankruptcy.

Chapter 13 Bankruptcy and the “Cram down” Process

When an individual files a Chapter 13, he or she may be able to take advantage of the “cram down” process to reduce the balance on the car loan and the applicable interest rate.

Chapter 13 Bankruptcy Brevard County

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Chapter 13 Bankruptcy May Lower the Balance Due on the Vehicle Loan to the Amount That the Car Is Worth

When you purchase a vehicle, it starts to depreciate in value as soon as you drive it off of the dealership’s lot. Thus, it is common for car owners to be “upside down” on their auto loans. A debtor in a Chapter 13 case can lower the balance due on the vehicle loan to the amount that the car is worth. To take advantage of the cramdown procedure, a debtor must have purchased the car at least 910 days (nearly 2.5 years) prior to filing the bankruptcy petition.

Chapter 13 Bankruptcy Repayment Plan

The cramdown can be accomplished through your Chapter 13 repayment plan. The debtor proposes that the car lender should be paid the value of the vehicle rather than the full amount due under the loan. Consider this example: If you owe $10,000 on your auto and its value is only $7000, then your plan can provide that the lender have a secured claim for $7000 and an unsecured claim of $3000. The logic is that if the lender seized your car and sold it, the lender would only be able to recover $7000 since that is what the car’s value is. Classifying the $3000 as an unsecured debt means that you will likely only pay a small portion (if any) of this amount under the Chapter 13 plan.

The cramdown process may also allow you to reduce the applicable interest rate under your contract with the lender. The applicable interest rate can be determined by the bankruptcy court, but it is commonly the prime interest rate with a little extra added on.

Contact a Brevard County Bankruptcy Attorney at Faro & Crowder, PA

If you are interested in learning more about how a bankruptcy filing will impact your debt, contact Faro Crowder, PA to schedule an appointment. We are located in Melbourne, Florida on Sarno Road and serve residents and businesses of the Space Coast and Brevard County.

Services Areas

We provide services throughout Central Florida including: Melbourne, Titusville, Palm Bay, Merritt Island, Cocoa, Cocoa Beach, Satellite Beach, West Melbourne, Cape Canaveral, Viera and Eau Gallie.

Get In Touch with Faro & Crowder, PA

Phone: (321) 784-8158
Address: 1801 N. Sarno Road, Suite 01
Melbourne, Florida 32935
Email: info@farolaw.com

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