Know your rights: Repossession doesn't end financial responsibility

By Richard Alderman
May 24, 2013 at 12:24 a.m.

I can no longer afford to pay my car note. One friend told me that if the car is repossessed or I return it, I am off the hook for any more payments. Another said no matter what, I would still owe the remaining payments. What really happens following the return of a car?

Actually, neither of your friends is correct; the consequences of a repossession depend on the value of the car. Whether a car is voluntarily returned or repossessed, the results are the same. Following the return of the car, the creditor usually will arrange for the sale of the car. After the sale, the creditor will apply whatever is obtained from the sale against the amount you owe. At that point, there are three possibilities. First, the amount you owe may be the same as what the car sold for. In that case, you will not owe anything additional. Second, the amount obtained at the sale may be more than you owe. If that happens, the creditor may keep the amount necessary to cover your debt, but must return the surplus to you. The third and most likely option is that the car sells for less than you owe. In that case, the amount obtained at the sale is applied to the debt, and you still owe the difference.

Here is an example of how this works. Let's assume you owe $12,000. The returned or repossessed car is sold at auction for $8,000. The creditor will apply the $8,000 to your debt, leaving a "deficiency" of $4,000. You still owe the deficiency and the creditor may pursue a claim to collect the $4,000. The bottom line is that unless the car is worth the same or more than you owe, you will still owe some money following its repossession or return.

I rented an apartment to be close to my new job. After just two months, I have been transferred. Is this a legal excuse to get out of my lease?

As a general rule, you may terminate a lease only for those reasons spelled out in the lease. Read your lease carefully to see if it gives you the ability to terminate it early due to a change in your employment. If it does not, you will be in breach of the lease and the landlord could be entitled to damages if you stop paying rent. My guess is that this will not be a valid reason to terminate your lease early. If that is the case, my suggestion is to discuss this with your landlord and see if you can work out a mutually agreeable settlement. For example, the landlord may agree to let you leave early if you forfeit your security deposit. Be sure to get any agreement in writing.

Am I entitled to recover child support from my child's father, whom I never married?

Generally, if you can establish that someone is the father of a child, he has an obligation to help support the child. The fact that you did not marry him does not matter.

My wallet was stolen. The thief charged $2,500 to my credit card. Am I responsible?

Good news, under federal law your maximum liability for the unauthorized use of your credit card is $50. In fact, you have no liability for any charges made after you report the loss. If your card is stolen, be sure to immediately call the credit card company.

How do I get a copy of a living will? Does it have to be notarized to be valid? What does it cost?

For a free copy of a living will, visit my website below; go to "Legal Topics," and click on "Wills and Living Wills." A living will, formally called a "Directive to Physicians," does not have to be notarized, but must be signed by two witnesses. You may make several originals and give them to a number of people to ensure that it will be available when needed. For example, you can keep one and give one to a family member and your physician.

Richard Alderman, a consumer advocate popularly known as "the People's Lawyer," is a professor at the University of Houston Law School in Houston. His column appears weekly in the Victoria Advocate. Write to him at UH Law Center, Houston, Texas 77204-6391. He also maintains a Web page at



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