My colleague Richard Lee answered this question for Georgia residents. Here is my take for fellow New Yorkers. Repossessions are complicated affairs, more so for the lender, so seek early advice.
Scene 1 - You fell behind in payments. You just watched the Repo Man wench your baby away on a flatbed.
If you fall behind on your car loan payments, you know what can happen. Sometime - at night when you're sleeping, maybe at work in broad daylight, worst if you are having the folks over for dinner - you'll hear the hook's harangue the whine of the wench. Voila, your car has been repossessed. What happens next? What should do? Repossessions are a creature of statute, meaning the law prescribes what car lenders can and can't do to enforce their security interest in your car. In New York State, repossessions are governed by Personal Property Law ?? 301-316 ( covering car loans. There is an article for leased cars: we'll talk about that another time) and the Uniform Commercial Code ?? 9-610-615. In New York, the repossessing lender must send you a written notification within 72 hours ( 3 days) to your last known address setting forth your rights to redeem the car how much redemption will cost, and the name address and telephone number of the place you can get more information form. The UCC also requires the lender to send a detailed pre-sale letter often called a " Notice of Intention." This letter must contain several details, e.g., private or public sale, date and place of such sale, if you will owe a deficiency, etc. The law deems this information so critical that the statute contains a " safe -harbor" example for banks and lenders to use. Regrettably, many do not. More on that later. So, look early for a letter from the lender describing what they will do with the car and when, and how much they claim you owe. This is important, so be diligent with your mail. If you have moved during your car loan, you might even want to file forwarding notices with the Post Office covering those old addresses. It doesn't help you later to say you never got a letter if, in fact, they sent it to an old address you can't deny
Redemption vs Reinstatement
At this point you may be thinking, " What is redemption?" Under the UCC and Personal Property Law, you "redeem" the car by paying the lender off in full, that is principle, earned interest, cost of towing and storing your car, etc. Many lenders will also include an offer to reinstate the loan by merely paying the amount owed plus costs. New York requires this for leases, not loans, but you often see these figures as part of the "Notice of Intention" letter. If you don't, do not assume you can't reinstate the loan; make a phone call to the lender.
Scene 2- The sale
The law contemplates two types of sales: public and private. The distinction is important, as each gives you different notice rights. And how the car gets sold will determine if the lender acted in a commercially reasonable manner. Think of an advertised auction as a public sale. A private sale is just that, more intimate a setting. Can the bank sell your car on eBay or Autotrader or another internet outlet? They can and they do, but the law is unsettled as to whether it is proper and what using the internet means to your rights under the law.
Scene 3 - After the car has been sold
You are entitled to know the amount of any deficiency ( or a surplus, hooray) and the basis upon which the lender calculates this figure. The law requires the creditor give you an "explanation letter". The explanation, like the pre-sale notice of intention, has statutory specifics regarding how the creditor itemizes the expenses it says you owe it for. Creditors do make mistakes, so look at ti carefully and ask for receipts and bills. If you are aware of the sale but have not received an explanation letter, ask for one. The lender can't charge you for it.
Scene 4- You get sued.
At some point the lender, or someone they sell the "chose in action" to, will ask you for the deficiency. Is it a " done deal?" Do you have defenses? Yes. As we said up top, the law sets forth certain procedures which must be followed in order for the creditor to dispose of your car. The plaintiff has the burden of proving that every aspect of the sale of the collateral was made in a commercially reasonable manner" , i.e., notice, method, manner, time, place, and other terms. This obligation is strictly construed and cannot be waived. A lender's failure to follow the law may result in a forfeiture of any deficiency and a claim for damages. In other words, how the car was taken, what notice you were given before and after the sale, how the sale was conducted, what the price was obtained, and how they calculate the remaining balance are all questions of fact. Sometimes banks as plaintiffs will mask their obligation to prove these facts by calling their action a simple breach of contract action. But remember what we said, repos are a creature of statute. Put them to their proofs! The law is severe to the lender, and very real. If a creditor violates the UCC notice requirements before or after the vehicle sale they can be made to pay you the total amount of the finance charge plus 10% of the principal. We recently had a case where our client was sued for a $7,000 deficiency. But in the end, the credit union owed him $10,000.00. And if you can prove that the sale or other steps the bank took were not " commercially reasonable", the bank may lose its right to the deficiency. There are other defenses to the action, as well. If the loan was used to buy the car, then the statute of limitations is four years from the disposition date. If the loan was sold to a junk debt buyer, standing is also an issue. And you may have claims under the General Business Law or Personal Property Law. So you see, it is not the end of the story when the lender hooks your car. Indeed, it has just begun.
Epilogue - Had a repo, got sued, now a judgment. Too late?
Like Yogi Berra said, " It's never over 'til it's over." Just because you've been sued over an old car loan doesn't mean you don't have rights or can't get relief from it. We routinely seek to vacate judgments for our clients, even those with garnishments or other liens. Of course, each case is fact dependent. How you were served, what the papers say ( or don't say), how long ago and whether you've made payments or admitted to the debt are things you and your lawyer need to consider. And each judge looks at vacatur requests differently and they have the final say. So marshalling your paperwork and talking to a consumer lawyer in your area is crucial. Just remember, past results are no promise of a future outcome.
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