My car was repoed and auctioned and now they want my soul!
May 27, 2008 7:55 PM   Subscribe

My car was repossessed and auctioned and now Honda wants the difference paid in full. If I could have made the payments I would have...are there any lawyers out there that can help answer my questions, worries and anxieties?

So I have hit some seriously hard times over the last few serious that I was unable to pay my car note. After I lost my job over the winter I tried to work something out with the dealership, Honda financial and anyone who thought that they might be able to help. So needless to say my car was repossessed and now they want me to pay them the $8500.00 difference that they lost at the auction. This was a 2007 Honda I bought after I was in a severe car accident last summer and it was only 8 months old when they took the car.

Now before anyone says that it is my fault and I should have paid my bills, understand that my decision was based on living in a home or living in a car on the streets of LA. Not an easy decision, but I had to make one. I choose to live in a home where I felt safe and secure.

Honda financial has now sent me a letter saying that I have to pay them $8,500.00 or they will send me to collections and heaven knows what from there. I am really worried that now they will try to come after me financially in a harder manor like freeze my bank account, or garnish my wages. I just started my new job a month ago and have been behind on a lot of bills and with my car accident in June, things in my life have been teeter tottering between the good, the bad and the ugly, mostly the ugly.

My brain is racing and I don't know what to do. I thought about calling them and trying to work out a deal hoping they will accept an offer of $2K and allowing me to make monthly payments (for a car I no longer have). But is that absolutely ridiculous? I think it is. I couldn't even afford the payments before, that's why it was repossessed.
I know there are lawyers and doctors and people who have been through this same exact situation, so I am asking for your help. Does anyone know what I should do? Should I contact them on my own? Should I contact a lawyer? What do I do? Anything would be of great help. Thanks everyone for your time.
posted by eve28 to Law & Government (14 answers total) 2 users marked this as a favorite
It's definitely a good idea to speak to a lawyer. Places like this offer free legal clinics.
posted by Nelsormensch at 8:15 PM on May 27, 2008

Since you have a regular income you may qualify for Chapter 13 bankruptcy, which could give you 3-5 years to pay your debts. See a bankruptcy lawyer.
posted by nicwolff at 8:30 PM on May 27, 2008

Honda financial has now sent me a letter saying that I have to pay them $8,500.00 or they will send me to collections and heaven knows what from there. I am really worried that now they will try to come after me financially in a harder manor like freeze my bank account, or garnish my wages. I just started my new job a month ago and have been behind on a lot of bills and with my car accident in June, things in my life have been teeter tottering between the good, the bad and the ugly, mostly the ugly.

I think your situation is exactly what bankruptcy protection is designed for. See a lawyer.
posted by jayder at 8:40 PM on May 27, 2008 [1 favorite]

First, take a deep breath. Whatever your financial situation was in the past, you can regain control of this.

Next, call a lawyer to help you. Legal Aid Foundation of LA has a consumer law group that can probably help you. If they can't they can refer you to someone who can.

Good luck Eve.
posted by 26.2 at 8:54 PM on May 27, 2008

Your credit is shot anyway, going to collections won't hurt it much further. It's not like they are sending thugs to your door. If it does go the way of collections, read up on all the rules and make them go to snail mail.

I think your freaking out more than is necessary. It was a secured loan, secured with the car itself. The car was repo'd, they don't have any more leverage over you other than your already bad credit rating. You need to deal with it to make it right, but don't freak out so much.
posted by cschneid at 8:57 PM on May 27, 2008

As others have pointed out, you have a lot of leverage here; they already have sold the car, so what they have is basically an unsecured debt now, essentially the same thing as a credit card. The collections people will talk a tough game and try to intimidate you, but that's because it's the only recourse they have. You can always declare bankruptcy and then they get whatever the court decides they should get, and they may well get a lot less than $8500.

So do not panic. Yes, they can garnish your wages... after they have given up on collecting from you and have sued you in court and obtained a judgment from the court. They won't do that for a while because lawyers are expensive. You still have plenty of time to work it out, and they will almost certainly be amenable to a payment plan.

Note that if you tell them no longer to contact you, which is your right under the Fair Debt Collection Practices Act, they have no choice but to move right along to suing you, so keep the lines of communication open -- you should be contacting them, not sitting by the phone hoping it won't ring.
posted by kindall at 10:14 PM on May 27, 2008

What Honda can get at this point, having sold the collateral/car is called a "deficiency judgment," which is just what it sounds like - a court judgment for the balance left on the loan after the collateral was sold (i.e., the "deficit" = amount borrowed - principal payments - asset sale proceeds). Your rights as a creditor vary considerably from state to state, so the advice above from 26.2 and kindall to talk to a consumer law attorney/legal aid group is right on point.

Unless you have a LOT of other debt, IMHO bankruptcy is probably the equivalent of using a howitzer on a flea. Good luck.
posted by webhund at 11:13 PM on May 27, 2008

I agree with everyone, sort of. The time to file for bankruptcy was before they took your car.

Look at the loan you signed, does it even say that you owe them the difference between the balance of the loan and the sale price of the car?

$8500 seems like a really big number for a Honda. What kind of car was it? How much did you put down? What was the balance of the loan? What was the blue book price versus the price it sold for? It almost seems like they took a lowball price for it because they knew they could get the difference from you. Also check out what identical cars (used 2007 Hondas) were retailing for at the time the auctioned it.

Because you could make this case:

Them: You owe us $8500
You: The car was worth $15,000 and you sold it for $7,000. I owe you $500.
Them: We can't control the price at auction!
You: You sold an identical car at Local Honda Dealer on 3/1/08 for $17,000. So that's what you could have gotten for it. It's not my fault you sold your car for less than it was worth.

I have no idea if this will work, but at the least, you might be able to bargain them down.

Because unless you signed a really, really bad car loan, that seems like a lot.
posted by gjc at 5:23 AM on May 28, 2008

The likelyhood of "bargaining them down" on the auction price is slim to none. Though that maybe a defense when they actually sue you, which they will. Keep in mind that you will have to provide evidence to support that theory.

First, they aren't going to accept $2k in settlement on a $8500 debt, so forget that idea. Try to make payment arrangements with Honda credit. Obviously you cannot afford to pay the original payment amount, but perhaps they will take a lower dollar amount.

If you cannot come to terms with them on a payment plan, they will sell/assign the debt to a collection firm. I can almost guarantee that your contract provides that you pay all costs relating to collection of the debt. That means that if you are sued, you will most likely have to pay the attorney fees, etc. This will make the debt go even higher. The collection firm will be much more ameniable to a payment plan as it's a PITA to sue if not necessary.

That said, if you are sued and they get a judgement and they will. They will put liens on your bank accounts and garnish your wages. This costs money and time, which is why the collection firm will be willing to make a payment plan with you.

Webhound is right, yes you can file bankruptcy, but why? If I were in your position I would make a payment plan and stick with it. I would not agree to payments that I would not realistically be able to meet.

Good luck.
posted by Juicylicious at 8:05 AM on May 28, 2008

Wait a minute, everybody. Declaring bankruptcy over an 8500 debt -- with a job? No, no, no.

$8500 is a tiny debt in the grand scheme of things. But avoiding it, or ignoring it, will make it much worse. Deal with it now: If you have $2,000 to pay, and think you can make regular payments (of any reasonable amount) on the $6,500 balance, then you should immediately call Honda credit and work out a payment plan. They will be happy to hear from you. Thrilled, even. And they will definitely prefer this idea over any of the nuclear options being discussed here -- if they have to sue you, they lose money; if you declare bankruptcy, they likely lose all the money (but your credit is ruined).

Take a deep breath, and call Honda. Mention the $2k and your steady job, and I bet you will be pleasantly surprised. Either way, you'll have more information about your situation, which will lessen your worry -- which is the worst part of all of this.

(I'm not a lawyer, doctor, or accountant, btw.)
posted by turducken at 8:42 AM on May 28, 2008

I had a Honda repossessed about 4 years ago. Same MO, lost job, had to decide if I should have a place to live or a car, etc, etc. I had paid every payment on time for over 2 years, in fact I had only a few months left until I owned it outright. Unfortunately, big business normally does not care about these things, they just want their money.
My Civic sold at auction and I was still responsible for about $2000.00. I ignored every letter sent, I took a new job out of the state, and got a new cell phone number.
I thought I had lost them. HA!
Just this last fall I was contacted by an attorney's office/debt collector. They did the threatening, and took me to court. Papers were filed and I took out a loan for $4500.00 to pay off the debt.
Yes, 4500 to pay off the 2000 in debt.
Lesson learned: Do not ignore the debt, call your finance company and make payment arrangements right away. You will probably be sent to a collection agency anyway, but they are more likely to make arrangements with you and take less money. This is definitely not worth a bankruptcy. Reserve that for when you may really need it.
posted by phytage at 9:59 AM on May 28, 2008

First of all, I'm so sorry that you are going through this. It sounds like a nightmare.

I really like Suze Orman's writings about debt and money management.

Here is a short article about what debt collectors can, and cannot, legally do when you can't pay a debt.

Here is info about a credit counseling service that she recommends.

Bankruptcy is a huge pain in the ass. Really. So I would try to work out payments with your debtors if you can. And, sometimes they WILL take 2000 on an 8500 debt, because they realize that 2000 is better than nothing.

Take a deep breath, remember that your financial situation sucks, but you can work on it and do your best; and that at worst, you'll end up...broke. Which you already are! So what is there to be afraid of, really?

Good luck, we're all pulling for you!
posted by sondrialiac at 10:33 AM on May 28, 2008

Oh, I also like Suze Orman's book, Young, Fabulous, and Broke. It can give you a lot of plans and information about getting financially solvent and keeping yourself that way.
posted by sondrialiac at 10:35 AM on May 28, 2008

Thank you everyone for your help and advice. I am making contact with the referrals that some of you suggested. I appreciate it a lot! I can't even begin to express my thanks. And thank you for not judging me!
posted by eve28 at 6:12 PM on May 29, 2008

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