When a car is repossessed, the lender typically sells it at auction to recoup some of the money that is owed on the loan. However, the sale price of the car may not be enough to cover the entire debt, and the borrower may still owe the lender a deficiency balance.
The lender can then take steps to collect the deficiency balance, such as sending the borrower a demand letter, calling them on the phone, or filing a lawsuit. If the borrower does not pay the deficiency balance, the lender may be able to garnish their wages, seize their property, or even have them arrested.
It is important to note that the statute of limitations for debt collection varies from state to state, so the amount of time that a lender has to collect a deficiency balance may be limited.
