Legal Question in Credit and Debt Law in Utah
Small claims court problem!
Me and my Husband are being taken to court for a car that we surrendered. They told us that they sold the car for 4,000 and that we owe them 5,000. What I was wondering is on both of our credit reports it says that the debt was wrote off and the account was closed and the balance is 0 So can they still take us to court even if they already wrote off the balance? There is alot more to this but this is the question that I am wondering about.
1 Answer from Attorneys
Re: Small claims court problem!
Yes they can sue you for what is called a "deficiency." After they repossessed your car they sold it, probably either at an auction or to a wholesaler. That is the $4000. You owed about $9000 (which may have included late charges, interest, costs of repossession, etc.) Thus they are suing for the $5000 deficiency. The credit report only reflects that the bank charged off the debt as a loss, and is used to describe the credit aspects, but does not reflect their legal rights.
You may want to appear at the court hearing. You may be able to negotiate a lower deficiency, or you may be able to actually win at the small claims trial. (Note that they can appeal for a new trial if they lose at small claims.) Your best choice may be to negotiate a smaller amount.
You also are probably aware that if you file bankruptcy that you can get all or part of the deficiency discharged in bankruptcy. You can use this fact to negotiate a lower deficiency amount, which perhaps you can pay off.
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