Lenders can pursue deficiency balance with a voluntary repo

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Question: I just had a question about a charge off on my credit report. I had a vehicle that was voluntarily repossessed in January. The car was charged off in April and placed on my credit report. The original balance was something like $14k. My Transunion Credit Report is showing that a payment of something like $3,700 was made toward the charge off and now it’s showing a balance of $10k. I never made that payment and I’m not sure if I should try to dispute it or not. It hasn’t been sold to a debt collector either. I’m just unsure of what I should do. Any advice would be appreciated.

Answer: It sounds like the lender has sold the vehicle at an auction for a low price. After the vehicle is sold, the sale price is subtracted from what you owe the lender. You are still liable for the remaining balance which is known as the deficiency balance. The current balance of $10K is probably the new balance after the lender sold the vehicle.

The lender or collection agency will eventually contact you about the balance unless you negotiated with the lender to waive the deficiency balance when you voluntarily gave up your vehicle.

I would not dispute it at this time unless you believe there has been an inaccuracy in the accounting process. It is common for lenders to make mistakes in the repossession process. Most states bar lenders from collecting a deficiency balance if they fail to comply with state requirements (such as not selling the property in a commercially reasonable manner.)

If you think the lender made a mistake, you can dispute based on that mistake but it might cause the lender to begin collection actions against you. The best advice I can give you is to contact an attorney in your state. Each state has different laws when it comes to vehicle repossession. It can be a complex issue. The best of luck to you.

 
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