Car Repossessions and Debt Negotiation

"I'd rather go to bed without supper than rise in debt." Ben Franklin

Franklin Debt Relief, LLC is a member of (TASC) The Association of Settlement Companies. This trade association has developed a standardized industry disclosure for consumers.

Debt Settlement for Car Repossessions
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Debt Negotiation and Car Repossessions

There are a number of consumers who aren’t aware of the differences between a secured and unsecured debt. While this may not be a problem for someone without credit, the average consumer seeking a debt relief solution certainly needs to be able to discriminate between the two. A secured debt means that a consumer has attached collateral, or a valuable asset, down on the loan or line of credit they have taken out to provide the lender with security in the case it can not be paid off. For example, a car loan is a secured debt. If you fail to make your car payments, the lender has the right to repossess the vehicle, sell it, and collect the proceeds of the sale to account for the money you still owe them. On the other hand, an unsecured debt has no collateral of value attached to it. For example, credit card debt is considered to be unsecured. The lender isn’t going to come to your home and take your credit cards, because the cards themselves don’t have any value. With that being said, many consumers who are struggling to make their car payments are facing the possibility of a repossession of the vehicle. Debt settlement companies, while they cannot enroll secured debt into their programs, can still be of assistance to any consumer who has in fact had a car repossessed by the lender.

As previously mentioned, when the lender repossesses the vehicle, the car is then sold and the proceeds are collected to make up for the debt owed by the consumer. However, the vehicle rarely sells for the same amount that the consumer purchased the car for. As a result, the lender does not receive the necessary amount of money owed to them. Therefore, the repossession is not the end of the line for the consumer in terms of making up for their debt. At that point, the lender will send the consumer what is known as a deficiency balance. In simple terms, the deficiency balance is what the consumer still owes the lender. To understand more specifically how the deficiency balance is calculated consider this example: Consumer A purchased a vehicle for $20,000 dollars and that vehicle was repossessed by the lender after several payments were not made. The lender sold the car for a total of $10,000 dollars. As a result, the deficiency balance is what is left over and still owed, in this case $10,000 dollars.

At this stage of the game, the deficiency balance is now considered to be an unsecured debt, because the vehicle has already been repossessed and there is no collateral attached anymore. Now a debt settlement company is able to work on your behalf to negotiate the balance of that deficiency down for you. Unfortunately, often the vehicle is worth more than what it is sold for, and the deficiency balance is realistically higher than it should be. Lenders will typically argue that because the vehicle is older at the time of repossession, it is no longer worth as much as it was when the consumer purchased it. While this may be true in a number of cases, particularly when the repossession occurs years after the consumer bought the car, often times the lender is attempting to see as much money back as possible and will not market the vehicle for the proper value.

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