Vehicle Repossession: Paying the Deficiency

Was the deficiency computed correctly?

A deficiency is the difference between the amount owed under the security agreement and the amount the creditor is able to recover upon selling the vehicle after default. The money from the sale will reduce the amount you owe. If the creditor gets less money than you owe, you will still owe the difference. If the creditor gets more money from the sale than you owe, you will get a refund of the extra money and there is no deficiency. Typically, to calculate the balance due on the deficiency, the creditor takes the unpaid amount you owe under the contract plus late charges, earned and unpaid interest, costs of repossession and sale, minus the proceeds of the sale. You should receive a rebate for unused credit insurance and unearned interest. The creditor should only be allowed reasonable charges for repossession, attorney's fees, storage, towing, repair and reconditioning expenses. A creditor is allowed to sue you for a deficiency judgment to collect the remaining amount owed on the deficiency.

 Is the creditor entitled to a deficiency?

In Delaware, failure to strictly comply with the notice provisions of the Delaware Commercial Code regarding the sale of the vehicle may be raised as a defense as to prevent the creditor from recovering a deficiency judgment. For example, where the creditor provides an accounting of the amount due in the notice but fails to account for the rebate of unearned finance charges and insurance premiums, this error in the amount is a defect in the notice. As a result, the creditor is barred from recovery of a deficiency. If a creditor sues you for a deficiency judgment, you should consult an attorney to find out whether you have any defenses which reduce or completely prevent the deficiency judgment.

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