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Because each state has laws on debt collection restrictions, if you make your last payment on a car loan before a certain time, your lender or debt collector may not be able to sue you to make you pay. If the selling price is lower than your car’s value, you will still be liable for the shortfall payments, even if your car has been reclaimed or voluntarily give up on it.
What are the laws for limiting car loans?
All obligations, including car loans, fall under the law of limitations. This law varies by type of debt and state. The car seizure restrictions law begins on the last payment date. After the debt limit law has passed, the debt will be deleted at any time and the collection agency can no longer sue payments.
Each state has different laws with different restrictions. According to the Consumer Financial Protection Bureau (CFPB), these usually range from three to six years, but some states have long-lasting restrictions laws. You can find certain state restrictions laws regarding car loan obligations and foreclosures by the court’s office.
When dealing with debt collection, remember that you can reset the limit law clock if you make a payment or enter into debt settlement. In some cases, even if you admit that your debt is yours, it could lead to a law that reboots the restrictions.
What happens after the restrictions are passed?
The collection agent may contact you, but it cannot sue you for non-payment. You can send a certified letter requesting that the collection call be stopped, but you still technically owe to debt. It can affect your credit score. Even after the window for legal foreclosure passes, the debt remains in your credit report.
There are several regulations regarding debt collection. This includes rules surrounding debt collection. For example, debt collectors are not permitted to bring legal action against consumers and to allow or threaten them to collect time obligations. If you are harassed by a debt collector – seek an attorney regardless of whether the restrictions law has been passed or not.
Can a collection of car loans pursue you after foreclosure?
If your car is retrieved or voluntarily gives up on it, the lender may ask you to pay the shortfall balance. A shortage balance covers the difference between debt and car value. If your car is retrieved, the difference between the amount your creditor sells it and what you owe will be able to balance the deficiency if your car is retrieved.
The lender has the right to collect this lack balance. If you do not pay it, the lender may take further action. It can sell your debt to a collection agency and you may file a lawsuit against you and bring wage decorations or liens to your other property.
If you are unable to pay your car’s lack of debt, consult with your lender as soon as possible. They may work with you to negotiate your debts or set up payment plans.
Other reasons why lenders can’t collect
Lenders have the right to collect shortfall payments on car loans that are within the limits of law, but in some cases they are not permitted.
You may not need to pay if:
- Loan paper has a flaw that does not allow you to collect shortage payments.
- The creditor did not provide legally necessary written notice to attempt to collect your debt.
- Your creditors weren’t selling your car in an honest and fair way.
- The creditors didn’t sell any cars at all.
- You filed for bankruptcy.
If you do not think you need to pay the shortage balance, consult your attorney for legal advice.
Additionally, many car manufacturers and dealers have provided payment relief as they struggled to manage car loans during the coronavirus pandemic, including borrowers’ ability to defer payments. Although these programs have been largely over, it may be worth contacting the lender and asking if relief is available.
Beware of scams that offer car loan relief to steal information.
Conclusion
If you haven’t already defaulted, you can consider refinancing your car loan and help you make monthly payments more affordable. However, if you missed multiple payments or defaulted, know that all car loans have laws of limitations on how long the liability for your debt is and when the foreclosure will take place.
When considering paying your debt, be sure to check all the facts. Find advice on car loans and legal resources through the Consumer Financial Protection Agency and always consult with legal assistance when necessary.
