Cosigners

Question: I did a voluntary repossession. The auto loan company said I had to pay the storage fee, repossession fee and a deficiency remaining after the car was sold. They claimed that if I did not pay that full amount they would garnish my checks an the co-signers checks also. Is that possible?

Answer: An auto finance or loan company that repossesses collateral can sell it and recover a deficiency if it shows that the sale is commercially reasonable. There cannot be a garnishment or wage deduction unless they sue you, serve you with process, and obtain a judgment.

A cosigner in Illinois is entitled to written notice of default and an opportunity to take over the contract payments before any collection action is taken, including credit reporting and repossession. 815 ILCS 505/2S. The cosigner should determine whether there has been a violation, and whether the alleged debt appears on their credit reports.

Have the contract and all of the notices you received in connection with the repossession and sale reviewed by an attorney. Often, there are problems giving rise to a defense or claim.

Generally, instead of a voluntary repossession, you are far better off selling or trading in the car and having the proceeds applied to the debt. This is because auto finance companies generally sell repossessed cars at auto auctions at a depressed price. You can generally do better on their own. The auto finance company has to consent to a sale, but if they refuse to do so and then sell the car for less, that is not commercially reasonable and may get you out of any deficiency.

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