If you lease or finance a vehicle, you’ll likely sign a contract with a lender promising to make your payments on time. This contract is called a loan agreement or a promissory note. The lending company maintains legal rights and has a lien on the title to that vehicle until it’s paid off. If you don’t make your payments on time, the lender may repossess the vehicle. In today’s blog, we’re discussing Georgia’s repossession fees and how bankruptcy can help stop the repossession process.
What is the Repossession Process?
The loan agreement between you and the lender will describe exactly what it means to default on your contract. Some common causes include: late payments, missed payments, inadequate vehicle insurance, or failing to pay for vehicle repairs. Some lenders may try to work with the vehicle buyer, but under Georgia law, lenders don’t have to give buyers notice of repossession. They don’t have to check in with the buyer before repossessing the vehicle, and they do not have to involve the courts.
A lender will typically use a third-party vendor (ex: a tow truck company) to remove the vehicle from the buyer’s property. The lender can repossess the vehicle from public or private property, meaning they can remove it from your home, the parking lot at work, or even a commercial parking lot (ex: grocery store, bank, etc.). Under Georgia law, the lender and its vendor cannot break into a garage, move cars that are blocking your vehicle, use violence, or trick the buyer into leaving their vehicle at an auto shop and then repossess it after the buyer leaves.
What Are Repossession Fees?
After the lender has repossessed a vehicle, they will notify the buyer that they have 10 days to pay off the loan and the repossession fees in full. (This step is only necessary if the creditor wants to preserve their rights to pursue the Debtor for any deficiency.) This may include:
- All payments owed on the vehicle
- All costs that the lender incurred during the repossession process, including but not limited to:
- Penalty fees
- Interest
- Towing fees
- Storage fees
- Attorney fees (if applicable)
The buyer can make these payments to the lender as long as they haven’t sold the vehicle yet or entered into a contract to sell the vehicle.
Buyers May Be Responsible for the Deficiency Amount
If the buyer cannot pay the outstanding payments and repossession fees within that 10-day window, the lender may decide to sell the vehicle at auction. It’s important to note that if the lender sells the vehicle, but the proceeds do not cover the total amount owed, the original buyer may be responsible for that deficiency amount.
So, for example, let’s say the buyer defaults on a $15,000 car loan, and the lender sells the vehicle at auction for $10,000. The lender may sue the original buyer for that $5,000 difference. Under Georgia law, however, the original buyer may not be responsible for the deficiency amount if the lender didn’t provide proper notice or if the lender sold the vehicle at an unreasonably low rate.
How Can Bankruptcy Help Repossession?
If you are facing vehicle repossession, filing for bankruptcy may help stop that repossession process. When a debtor files a Chapter 7 or Chapter 13 bankruptcy, all lender or creditor action immediately stops. This is called an automatic stay, and it’s a temporary solution while you and your bankruptcy attorney determine your best legal options.
An experienced attorney can evaluate your situation and stop the vehicle repossession. In a Chapter 7 case the Debtor will either surrender the vehicle or make arrangements directly with the creditor to bring the payments current. The creditor may allow the Debtor to cure the delinquency over time and the terms of any work-out arrangement will be included in a reaffirmation agreement that the Debtor will execute with the creditor. In a Chapter 13 case, the Debtor proposes to pay back what is owed to the car creditor, or a lesser amount depending on when the vehicle was purchased and whether the amount owed is more than the value of the vehicle, over a 3-5 year period. The Chapter 13 plan reorganizes the debt on the vehicle making the payments more affordable for the Debtor in most cases. The attorney does not negotiate with the car creditor expect possibly on a limited basis in the context of the terms of a reaffirmation agreement in a Chapter 7 case.
Have Additional Questions? Call Burrow & Associates’ Bankruptcy Attorneys
Every year, millions of Americans face tough financial circumstances. Filing for bankruptcy can give you a fresh financial start. If you are facing vehicle repossession, reach out to the experienced bankruptcy attorneys at Burrow & Associates. Our attorneys will evaluate your situation and explain the best options for you and your family. To schedule a free consultation, you can call (678) 323-2394 or use our online contact page. Burrow & Associates has four offices located in Duluth, Conyers, Athens, and Kennesaw and offers virtual consultations for clients who would prefer to not meet in person.