How to defend a repossession deficiency lawsuit

November 9, 2009 by Todd Murray · Leave a Comment 

After your lender repossesses your car, they will sell it and apply the sale price to the amount remaining on your loan. In most cases, there is still a deficiency remaining on your loan after applying the sale proceeds. More often than not, your lender will then sue you for that deficiency. If that happens, here are some possible defenses to the deficiency lawsuit:

  • Statute of limitations. In most Minnesota debt collection cases, such as credit cards, the statute of limitations is six years. However, the statute of limitations for a repossession deficiency claim is four years. If the creditor brings the deficiency lawsuit over four years after you made your last payment, the statute of limitations on the claim may have passed.
  • Incomplete or ineffective assignment of the loan. Like credit card debts, many repossession deficiency accounts are sold to third-party debt buyers. The debt buyer must be able to provide a complete and detailed chain of title of ownership of your account. Often, the chain of title is either incomplete or does not specifically identify your account, but rather a large batch of accounts.
  • The sale of your car after repossession was not commercially reasonable. The general rule is that every aspect of the sale of a car after repossession must be commercially reasonable. This essentially means that the creditor must act in good faith and use its best efforts to get a fair price for your car.
  • The creditor accepted your car as a full satisfaction of the loan. Occasionally, creditors tell people that if they turn over their car voluntarily, they will not pursue the person for a deficiency. Creditors may later deny making this promise. Some courts have held that promising not to pursue you for a deficiency if you turn over your car voluntarily bars that creditor from pursuing a deficiency.

It’s also possible that the creditor may not have followed the proper procedures when they repossessed your car. This may allow you to bring a counterclaim against them in the deficiency lawsuit. This post details some of the most common wrongful repossession practices. While a counterclaim is not technically a defense to a deficiency lawsuit, a valid counterclaim can often lead to a reasonable settlement of the deficiency claims.

If you live in Minnesota and have been sued to recover a repossession deficiency balance, feel free to contact me to discuss your case further.

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Avoid these defenses to debt collection lawsuits

April 17, 2009 by Todd Murray · Leave a Comment 

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Lack of a signed contract

Consumers often believe that credit card companies must produce a copy of the contract that the consumer signed to prevail in a debt collection lawsuit. But there are alternative theories used by debt collectors, such as account stated, that may allow them to prevail by merely introducing credit card billing statements. Account stated is an equitable theory where the debt collector must show that the consumer “assented” to the account by receiving billing statements and not objecting to them within a reasonable period of time. But there are numerous defenses to this argument, particularly if the debt collector is a debt buyer.

Hardship

Unfortunately, the fact that you cannot afford to pay the alleged debt is not a defense to a lawsuit. The issue in a debt collection lawsuit is not whether you can actually pay the alleged debt, but whether you are legally obligated for the debt. That fact that you are unemployed, receive public assistance, or are otherwise “judgment proof” may mean that the debt collector will never collect any money from you. But it is not a legal defense to a lawsuit.

Attempted to pay

While frustrating, the fact that the debt collector refused to work out reasonable payment arrangements with you is not a legal defense to a debt collection lawsuit.  Courts do not have the authority to force the debt collector to accept the payment arrangement you proposed.

Ex-spouse responsible for payment under divorce decree

Just because your divorce decree ruled that your ex-spouse is solely responsible for payment of a joint debt, doesn’t mean you cannot be sued for the obligation by a debt collector. Divorce courts do not have the power to modify contracts between you and a third-party debt collector. You may, however, be able to sue your ex-spouse to repay you for any money you are ordered to pay the debt collector.

Potential defenses to a debt collection lawsuit

Now that you know how not to defend a debt collection lawsuit, here are some good potential defenses: statute of limitations, unauthorized and/or fraudulent use of the account; identity theft; incompetent or insufficient evidence; and lack of valid assignment of the debt (usually only applicable in debt buyer lawsuits). This is not an exhaustive list and these defenses may or may not apply to your particular case. Consult with a consumer lawyer in your area for specific advice about your case.

If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.

(photo: Picture Perfect Pose)


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