If your car loan lender repossesses your car, you're probably not entitled to any notice before the repossession. But in most states, the car lender must provide you with certain notices after the repossession. Read on to learn about what your car lender must tell you after the repossession and after the car sale.
Most states allow car loan lenders to use repossession as a self-help remedy if you default on your car loan. Courts and law enforcement don't normally monitor the repossession process as it is happening. You might not even know when or where the car will be repossessed. Most states don't require car loan lenders to give debtors any kind of notice before they repossess the vehicles. (Learn about options to avoid a car repossession.)
Even though lenders usually don't have to provide notice to you before the repossession, in many cases, they have to inform you about certain issues regarding the repossession after it occurs.
In most states, the bank must notify you, in writing, of the following matters within a short time, usually five days after it has repossessed the car, but before it is sold or auctioned:
The lender must provide you written notice of your right of redemption and (or) right of reinstatement. It must tell you:
In the event you don't reinstate the car loan or redeem the car, the lender is also required to send you a written notice if it intends to sell the vehicle. This notice may be combined with the first notice, above.
Usually, the notice must contain the following information:
If the car is sold, the lender must provide you with an accounting of how the proceeds of the sale were applied against your debt. Most states allow the lender to apply the sale proceeds as follows, in this order:
If the sale amount doesn't cover the loan balance and costs. If the amount of the sale isn't sufficient to cover all of these items, then you owe what's called a "deficiency balance." The creditor must notify you of the amount of that deficiency. Normally, if you don't pay the deficiency, the creditor may take further action, such as suing you for the balance. (Learn about different options if you owe a deficiency after car reposession.)
If there is a surplus. If the creditor recovers more than what's owed on the obligation from the sale, then there is a surplus balance. The creditor must give you an accounting of the surplus and pay it to you. There is one exception: If you there is a co-signor and the loan agreement gives the co-signor rights to the surplus, the creditor must pay the surplus to the co-signor. However, surpluses are not common in car repossession sales because the vehicles are typically worth much less than what's owed on the loan contract.
To find information about repossession laws and notices in your state, you can do some research on your own (visit Nolo’s Legal Research area), contact your state attorney general's office or state consumer protection agency (see State Consumer Protection Offices to find yours), or consult with a local attorney.