How can I resolve a dispute over a car that was returned voluntarily to the bank because I couldn’t pay?

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How can I resolve a dispute over a car that was returned voluntarily to the bank because I couldn’t pay?

I lost everything – my home, another vehicle, my whole life savings, due to illness. I filed Chapter 13. I called to return the vehicle 12/09. now I am being harassed for the balance of the loan. They sold the car for far less than it was worth and the amount owed. I couldn’t pay for the car then and it is even worse now. What can I do? They are demanding over $5k; they sold the car for around $2k. It had to be worth more than that. I only had it a short while an I was charged $10k. Is there a solution to help me have this debt reduced or discharged?

Asked on December 2, 2010 under Bankruptcy Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

1) First of all, you have to recognize that if you owed a certain amount for the vehicle--e.g. the unpaid balance on the financing--and the car was sold for less than that amount, you are still obligated for the remaining balance. So the issue in what you owe is: a) how much was left on the loan? b) how much was it sold for? c) what is the differenc between a) and b)--that's how much you have to pay. (That's slightly oversimplifying; they can deduct certain administrative or auction expenses from the proceeds before applying the remainder vs. your loan.)

2) Property often goes for  less than its market value at auction, since there are risks involved in buying it (it's purchased for cash, as is); those risks reduce the price. If you think there was fraud or collusion--e.g. the bank gave a sweetheart deal in an unfair sale to the girlfriend of a manager-- that's one thing; but w/out something improper, it sold for what it sold for.

3) You can try to negotiate down the debt, but the creditor doesn't have to do so--it's voluntary.

4) You may wish to consider bankruptcy as an option. Here's a link to an excellent, government site that will give you a good overview of the process: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspx


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