Is there a 60% principle payment rule for protection in the event of repossession?
Wells Fargo Auto Finance had 2005 Ford Taurus financed for $26,000 that buyer was not aware of before signing purchase agreement. Upon learning this he approached Wells Fargo NUMEROUS times to refinance and each time was denied that opportunity. After paying $17,760 so far for this vehicle and being unable to afford the monthly payments, it was repossessed in Dec. 2010. Wells Fargo sold vehicle and is saddling the buyer for the balance, a total of over $5,000+ more dollars. Our question to you is based on info found on search engines that a new law was brought into effect to protect buyers in such unreasonably high amounts owed for a vehicle they no longer even own. This new law states that if over 60% of the principle of a vehicle has been paid, the repossession/banking agency can not attempt to collect any more money after that point. We are requesting more info if you have access to such, and if Kentucky state residents are among the "protected"! Thank you kindly for your help.
Is there a 60% principle payment rule in effect for car owners' protection in the event of repossession?
—Janet
Short answer
There is no known rule that stops a lender from collecting a deficiency once auction proceeds cover 60% of the loan. A Kentucky consumer attorney can answer that precisely, and if the deficiency is collectible, settle it for less.
Key points on this page
- What you described is typical: the bank repossesses the vehicle, sells it at auction, and usually gets less than the balance left on the note
- The amount still owed after the auction is the deficiency balance
- Lenders either place the deficiency with assignee debt collectors or sell it to a debt buyer who collects on it
- There are chapter 13 bankruptcy variables that fit the background here, and there may be predatory lending questions about the auto financing itself
- A consumer attorney in Kentucky is the right person to answer whether the deficiency is collectible in your situation
- A deficiency balance is no longer secured by an asset, which is why settling for less is the approach, and leaving it alone can end in court and a judgment
What you have described is typical when a bank repossesses a vehicle for failure to make the contracted payments. They sell the vehicle at auction and usually receive less than what remains due on the note. The amount left over after the auction is referred to as a deficiency balance. Lenders will either pursue the collection of the deficiency amount through assignee debt collectors, or sell the debt to a debt buyer who will pursue collections.
I am not aware of a law that would prevent the debt owner from attempting to collect on a deficiency if 60% of the loan balance was met with auction proceeds. There are variables to a chapter 13 bankruptcy that rhyme with the background you provided. There may also be predatory lending implications with auto financing that could be applied to the situation.
I would encourage you to locate a consumer attorney in KY who could answer your questions more succinctly.
If you find that the full deficiency balance is collectible, I would encourage you to approach settling the debt for less than the balance as this type of debt is no longer secured by an asset. Deficiency balances can end up in court which may result in a judgment.
Anyone with questions or concerns about deficiency balances from repossessed vehicles, voluntarily turned in or otherwise, is welcome to post in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
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