I got a letter from the bank that reposed my car, they say they are sueing me for value owed, can they do this?

The answer depends on the specific terms of the note you signed in which you promised to repay the money you borrowed to buy the car.

Some financing is "non-recourse," meaning that the lender can look ONLY to the collateral -- and not to any other assets of the borrower -- if the borrower defaults on the note by failing to make the required payments.

You may need a lawyer's help, looking at the specific paperwork you signed, to figure out if your obligation is non-recourse or not. But if I had to guess: In Texas, in my experience, most car notes are NOT non-recourse. Rather, they're drafted to create an obligation on the part of the borrower to repay the entire amount of the loan -- even if the proceeds to the lender from repossessing and selling the collateral (the car) aren't enough to pay off the total debt. The repo doesn't take you completely off the hook if that's the case.

However: Both the contract terms and the commercial law governing such transactions generally require the lender to apply the full NET proceeds of the repossession and sale against the loan balance. But the lender can deduct his costs. So, for example, if there is $10,000 unpaid on the note, the lender pays someone $500 to do the repossession, the car is auctioned for $7,000, and there are $500 in fees and expenses in conducting the auction, clearing title, etc., the lender's gross proceeds are $7,000, his net proceeds (less his expenses) are $6000, and he has to apply that full $6000 to the outstanding debt -- meaning the borrower now only owes $4000 personally on the "deficiency."

The governing law also requires the lender to behave in a "commercially reasonable" manner when he conducts the repossession and auction. There's obviously a potential for the lender to be careless, or corrupt, in auctioning a repossessed vehicle for way less than it's worth. If the lender in my hypothetical above could show that the car really should have sold for $9000 at the auction, and that all the expenses should have come to only $700, then the lender should have netted $8300 from the repossession and auction, and the borrower should only owe $1700 personally on the "deficiency."

IF your loan is not non-recourse, then you may have some negotiating leverage based on this. Whether a repossession and auction has been done in a "commercially reasonable" fashion is a judgment call, something about which two different "expert witnesses" might have very different opinions. An argument over that may change the lender's very straightforward "Here's how much he owes, judge, now give us a judgment without bothering to hold a full-blown trial" kind of lawsuit into "Gosh, judge, there's a disputed question of fact that we need a jury to decide after a full-blown trial" kind of lawsuit. Lenders want to avoid that, even though typically they also can get their legal fees back from you too, and your complicating the case drives up the amount you may have to pay in fees. If they've already seized and sold their collateral, though, most of the rest of your assets may be protected from seizure under the homestead laws; their ability to collect may be much more doubtful even if they win the lawsuit. And so you may be able to strike a deal to pay off the deficiency -- the difference between the unpaid note amount, and the remaining balance after the repo -- at a pretty good discount. They might consider a new, lower payment plan. As always, if you can offer a chunk of cash, that's how you can get the best terms.

These comments are made for educational purposes only and do not constitute legal advice. No attorney-client relationship exists between us.

It is quite common for deficiencies on repossessed cars to be sold to debt buyer the same as credit card debt. If that happens you will know because the lawsuit will be brought be a name you do not recognize. You may have strong procedural defenses to this claim (strong enough to avoid payment) and should get an attorney experienced in consumer debt issues.