I live in Wisconsin. I recently fell behind on my car payments. I got a notice giving me 15 days to get current, but I couldn’t pay up within the time period because I lost my job. The notice said I could request that the lender go to court, but I didn’t want to be on the hook for attorneys’ fees and costs so I let it repossess my car. Now I’m getting a notice saying I owe a bunch of money. Do I really owe money to my lender?
Probably. In Wisconsin, if your car is repossessed the lender can sell it at a public auction or through a private sale. If the proceeds from that sale are not enough to cover your unpaid loan balance plus the costs the lender incurred in repossessing and selling your car, you will owe the difference. This amount is called the deficiency. If you don’t pay the deficiency, the lender can sue you in court and get a judgment against you.
There is one exception to the lender’s right to seek a deficiency from you. If, at the time of repossession, you owed $1,000 or less on the car loan, the lender cannot go after you for a deficiency. But this exception rarely, if ever, applies in car repossession situations. (It might apply in other types of repossession actions where the sums in question are much lower, such as with home appliances.)
Read on to learn about the car repossession process and deficiency balances in Wisconsin.
What Is a Deficiency After Car Repossession?
If you fall behind in your car loan payments in Wisconsin, your car lender can sue you to regain possession of the car and for a deficiency. However, Wisconsin law also allows car lenders to repossess your car without first going to court. In order to do this, it must send you a notice, which among other things:
- sets forth the amount of your delinquency and gives you 15 days to pay up
- notifies you that you can request that the car lender go to court to get your car, instead of repossessing it
- notifies you that if you request that the lender go to court, you might be liable for the lender’s attorney’s fees and costs, and
- tells you that if you don’t pay the delinquency or request a court action, the lender can repossess your car. (Wis. Stat. § 425.205.)
You chose to let the lender repossess your car. This was not a bad choice, since you owed the delinquency and, as you stated, going to court would mean you’d be on the hook for your lender’s attorney’s fees and court costs. (Learn how car repossession work.)
After repossessing a car in Wisconsin, the lender will usually sell the car at a public auction or through a private sale (most likely to a used car dealer). If the sale price is not enough to cover the remaining balance on your car loan plus the lender’s repossession and auction costs, you will owe the difference – called the deficiency. (Learn more about deficiency balances after car repossession.)
What if the sale proceeds are more than the loan balance? If, on the other hand, the sale proceeds covered both the unpaid loan balance and the lender’s costs, you wouldn’t owe a deficiency. In fact, the lender would have to return any surplus money to you. Unfortunately, this rarely happens in car repossession cases.
Wisconsin’s Anti-Deficiency Law
In Wisconsin, the lender is prohibited from collecting a deficiency if, at the time of repossession, the unpaid loan balance is $1,000 or less. (Wis. Stat. § 425.209.) As mentioned above, this exception rarely kicks in for car repossessions.
When the Car Lender Violates the Law
However, if the lender failed to follow Wisconsin rules when it repossessed the car, conducted the sale, or calculated the deficiency balance, you might be able to challenge its right to the deficiency. (Learn more in Can a Car Lender Collect a Deficiency After Repo?)