If I’m being sued by a debt collector for $1100, can take my car if I am still paying the car note?

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If I’m being sued by a debt collector for $1100, can take my car if I am still paying the car note?

Asked on May 9, 2012 under Bankruptcy Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If the debt collector suing you represents the bank, lender, or financing company which financed your car, then if you defaulted on the note at some point and have not made good on that default--even if you are now paying the note on time (i.e. there is still a balance due and owing from the previous default)--then yes, the could repossess the car pursuant to the financing agreement.

If the debt collector does not represent the company which financed the car, then whether they can take it depends on how much equity is in the car; the company which financed the car has priority, which means that the car cannot be used to satisfy any debt until its debt is paid.

Say the car is worth $10k and you owe $7k still on it; the new debt collector (assuming they sue you and win) may be able to force the car's sale to satisfy debts. $7k would do the financing company; the $1,100 owed to the debt collector would then be paid from the remaining $3k of value.

On the othe hand, say the car is now worth $5k and you owe still $5,500 or more on the car. Since there is no equity in the car, there is nothing to pay the new debt collector its $1,100, so they should not be able to force the car's sale.


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