“If my car is totaled, I can’t be sued for any deficiency, right?”
Many people say that you can’t be sued, because you weren’t responsible for your car being totaled.
However, the reality of the situation is that you do owe a deficiency on your car.
If the loan on the car is $15,000, and the insurance company only covers $12,000, then you still owe that $3,000 deficiency because the loan company is entitled to $15,000.
The same concept applies to repossessions.
You’re still responsible for getting that $3,000 paid to the loan company.
So it may be the car finance company coming after you or a debt collector calling you or even a debt collector suing you.
Because of this fact, some people will pay for gap insurance.
This covers the deficiency from the insurance company.
Most people understand that once the car is driven off the lot, the value of the car goes down. (Do keep in mind you have to read the fine print — these gap insurance companies are as bad as the rest of the insurance companies in delaying and denying legitimate claims).
If you decide not to purchase gap insurance, keep in mind that you may owe a deficiency if something happens to your car.
If you’ve been in a wreck with someone else and it’s their fault, make sure you get that money from them.
However, if something else has happened that couldn’t be avoided, then you need to make sure you can pay the difference to the loan company. It may be that you need to work out a settlement or there may be legitimate ways that the loan company is not entitled to the difference. For example, we had a case where a company said “We’ll keep the car and call it even” — and they kept the car. That ended the matter — there was no deficiency owed. Now this company tried to collect it but they failed and there will be serious consequences to them for doing that.
Bottom line, if you have a car that was totaled or repossessed, then you need to be aware of a possible deficiency that you may owe.
Contact us if you would like help looking at your options.
If you live in the state of Alabama and you have any questions about what we’ve covered in this article, you can call us at 1-205-879-2447.
I look forward to talking with you.
Have a great day!