In most cases, the car dealer or lender who repossessed the vehicle is legally obligated to sell the car for its fair market value. If the resale amount exceeds the outstanding debt, including repossession costs and other approved expenses, the borrower is typically entitled to receive the excess proceeds.
To illustrate, let's consider two possible scenarios:
Scenario 1: Borrower receives the excess proceeds
- In states with strong borrower protection laws, the borrower is entitled to the difference between the resale price and the total debt, after factoring in any allowable expenses.
- The car dealer must either refund the excess amount directly to the borrower or credit it against any other outstanding debts or charges related to the repossession.
Scenario 2: Excess proceeds are used by the lender
- In some states, the lender or car dealer may be permitted to retain the excess proceeds, but they are required to provide a detailed accounting to the borrower.
- The lender may justify this by claiming additional expenses not initially accounted for during the repossession process.
- The borrower might need to challenge these expenses or file a complaint with relevant consumer protection agencies if they have concerns about the accuracy of the accounting provided.
It's essential for the borrower to be aware of their rights under the applicable state laws and to proactively inquire about any surplus funds from the sale. If the process is not transparent or the borrower believes there's a discrepancy, it is recommended to seek legal advice or consult with consumer protection organizations for further guidance in asserting their rights to any excess proceeds resulting from the resale.
