State Limits on the Collection of Deficiency Balances

Some states limit the creditor's ability to collect a deficiency in certain situations. Find out if your state is one of them.

If a creditor repossesses your property (such as a car or major appliance) because you defaulted on the underlying loan, it may still be able to go after you for a deficiency. A deficiency is the difference between what you owed and what the creditor was able to get from selling the property (called the collateral). Some states prohibit creditors from collecting deficiency balances in certain situations. For example, Alabama does not allow creditors to go after a deficiency after repossession if you paid less than $1,000 for the property.

To find if out if your state prohibits creditors from collecting deficiency balances in certain situations, check the chart below. If your state is not listed, it doesn't place additional limits on the collection of deficiency balances after repossession. The applicable code sections are listed in case you want to read the law yourself. To learn how to look up state laws, visit Nolo's Legal Research Center.

To learn more about deficiencies and when you might owe one, see Deficiency Balances After Repossession.

State


Code Section


When a Deficiency Balance Is Prohibited

Alabama

Ala. Code §â

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