Many cases are filed in Tennessee for vehicle deficiencies, even with no repossession. How can that be? When consumers go out to buy a car, they sign a contract to purchase the vehicle for a certain amount. As soon the consumer drives off the lot, they are upside down on the car. This means the consumer owes more than the vehicle is worth. This is especially true if the car is damaged in some way.
Do you owe for a damaged or unserviceable vehicle? Has your car been repossessed and sold, and you now owe a balance? A Tennessee Debt Defense Attorney from Fitzgerald & Campbell, APLC, can help. Call or message us online today to schedule a confidential consultation and learn more about your options.
What is a Car Loan Deficiency?
A car loan deficiency, sometimes called a deficiency balance, can occur when a car is repossessed, damaged, or goes into foreclosure. The deficit is the amount of the original loan that remains unpaid after the lender has sold the vehicle to cover the bulk of the loan balance.
Deficiency cases are lawsuits filed to recover the difference between the amount owed per contract and the amount received due to the disposition of the vehicle. Usually, these vehicles are sold at auction. So, if the consumer owes $10,000 based on the contract, and the car is disposed of for $6,000, the consumer is sued for $4,000 and maybe even costs and attorney’s fees.
When Will a Car Loan Lender Go After a Deficiency Judgement?
Possible scenarios for when a car loan lender pursues a deficiency judgment can include when a consumer buys a vehicle and realizes they cannot afford it, or the car does not work, and they turn it into the dealer.
We are often asked, “Is there a deficiency when a creditor charges off a car loan?” The answer is yes. A vehicle can be repossessed and sold for nonpayment, and the consumer may be sued for the remaining balance not obtained when the car was sold at auction. In Tennessee, you must receive a notice outlining what the creditor intends to do with your repossessed vehicle and explaining your rights at least ten days before the proposed sale. You have the right to redeem it at that time. Tennessee Code Annotated §47-9-610 states that “[e]very aspect of a disposition of [the car], including the method, manner, time, place, and other terms, must be commercially r
disposition of the vehicle must be fair, and the consumer must get notice of the actions taken by the creditor, including pursuing a deficiency judgment lawsuit.
What is Implied Warranty of Merchantability?
When a consumer buys a vehicle, certain implied warranties apply unless they are expressly waived. The most important is the Implied Warranty of Merchantability. Tennessee Code Annotated §47-2-314 states, “[u]nless excluded or modified, a warranty that the goods shall be merchantable is implied in a contract…”
This means they must be “fit for the ordinary purposes for which such goods are used….” Suppose the seller wants to exclude the warranty of merchantability. In that case, there must be language to that effect in the contract, and the language “must mention merchantability and in case of a writing must be conspicuous…” (Tennessee Code Annotated §47-2-316).
If there is language in the contract that excludes the Implied Warranty of Merchantability, think twice about entering into that contract. This implied warranty is important because if you buy a vehicle and it does not work this implied warranty may become very important to you in a deficiency case.
Can I Be Named in a Deficiency Judgement if I Co-sign on a Car Loan?
Co-signers have certain rights and responsibilities when agreeing to partner with a borrower. For example, the co-signer is responsible for payment of the loan even though they do not enjoy possession or use of the vehicle. This means that you could be named in a deficiency lawsuit if the borrower defaults on the loan or otherwise incurs a deficiency judgment from the court.
Defending deficiency cases is tricky and requires a lawyer if success is a concern. Contact Fitzgerald & Campbell, APLC in Franklin, immediately if you are sued due to a deficiency on a car loan in Tennessee. One of our experienced Tennessee Debt Defense Attorneys can help. Call or message us online today to schedule a confidential consultation and learn more about your options.