I got a letter in the mail that the bank has finally sold our car at auction. We owed $12,000 and the bank sold it for $4,000, only a third of what we owe. I have a couple of questions as to the repo and credit moving forward down the road. One of our options was bankruptcy but we decided against that as it was only the car we had to give up and we know a bankruptcy will stay on the credit for 10 years which is far too long. How long does a repo stay on a credit report? How long can a bank sue us for a deficiency balance and will they?
A repo will stay on a credit report just like a charge off or late payment for 7 years, so it is a few years less than a bankruptcy, not to say that you must wait an entire 7 years to get something on credit again. In fact in many cases a bank or finance company extending credit may only look at the last two or three years in order to give you a new loan. However chances are that you will be paying a higher interest rate since the repo will be weighing down your credit report for the time being. You can take a look a some of the other articles we have on how to repair your credit after repo as this may help you in raising your credit again to a point where the repo may not even have a change on your future interest rates offered but again this will surely take at least 2 to 3 years and working on your credit during that time.
As long as you can bring that credit up over 640 again, getting a home loan or most other loans at a great rate is not uncommon. It seems that a 640 score is the magic number to even be considered for a good rate.
Dealing with deficiency balances
Yes a bank can sue for a deficiency balance if you have not filed for an included the car in a bankruptcy so that is certainly one of the down falls of letting the car get repossessed. It also has allot to do with the amount owed and the chances of them collecting that money from you. many times a bank or the representative of the loan will look at your job status and financial situation prior to suing you for a deficiency balance. This way they can pick and choose who they have a better chance collecting from. It also depends on the amount of people they have with deficiency balances at the time, if it is a high number the chances are less likely you will be sued.
How long after the repo can they sue me?
Depending on what state you are in, the statue of limitations to sue on a written contract is usually either 4 or 5 years so during this time they may monitor your job status, your financial ability to pay once they have a judgement, sometimes they will accept a payment plan on a part of the balance, depending on if you were able to negotiate it lower or not.
Sometimes a repo is out of your control and must go down for unforeseen reasons but even worse is a few years later getting served for a deficiency balance, much better to negotiate a deal with the bank lender and try to avoid a future lawsuit and if you do get served, better to hire an experienced lawyer in that field to help you out with the negotiation.