Your credit card company wants you to pay your balance voluntarily and will do everything possible to make sure this happens. Unfortunately, not all individuals are able and willing to make payments on their credit card debts. In the event the creditor cannot procure voluntary payments from you, it can pursue payment by force. Unpaid creditors have the right to seize assets, such as your car, if you do not make payment arrangements.
Debt Collection Lawsuit
Before a credit card company can seize your vehicle, it must get a judgment against you through the court. A judgment serves as the court's acknowledgement that the debt in question is valid and the creditor has the legal right to collect. A credit card company obtains a judgment by filing and winning a debt collection lawsuit against you.
Personal Property Lien
After receiving a court judgment, the credit card company has the right to place a lien against your car's title. The lien secures the judgment and gives the credit card company a valid legal claim to your property -- in this case, your car. You cannot sell your vehicle until you pay off the judgment and have the lien released. In the event you continue to ignore your defaulted credit card debt, the credit card company has the right to use its lien to repossess your vehicle.
Collecting Through Repossession
After the creditor seizes your car, it will sell the vehicle either at an auto auction or through a private sale. Creditors must sell repossessed vehicles for a reasonable amount, according to the Federal Trade Commission. Thus, while the company does not have to hold out for fair market value, it cannot sell your repossessed vehicle for a ridiculously low price. After the sale, the credit card company applies the proceeds to your outstanding balance.
Deficiency Balance
Just because your credit card company repossessed and sold your car, that does not mean that you no longer owe the debt. If your creditor sells your car for a reasonable amount but that amount does not meet or exceed your card balance, you are responsible for paying the amount that remains -- known as the "deficiency" on the account. The credit card company can seize other assets you owe or garnishee your wages when collecting the deficiency.
Lien Priority
If you used an auto loan to purchase your car and have yet to pay off that debt, your vehicle already carries a lien. Because your auto lender filed its lien before the credit card company, the original lien takes priority over the new one. Thus, the credit card company must pay off the original lender's lien before it receives any money from the sale of the car. Depending on the amount you owe on your auto loan and how much your car is worth, seizing and selling the vehicle may prove more troublesome than its worth for the credit card company.
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