Charge-offs and Repossessions

Listen to "Charge-offs and Repossessions" on Spreaker.

You may be reading this article because you bit off a little more than you could chew. You may have over-estimated just how far out of budget you could handle the finances, or maybe you just hit hard times like many of us have after a job loss or career change. It happens and it’s called life. Don’t feel pressured, don’t feel judged. The same person that judges you could wind up in the same situation tomorrow. In several articles, I have seen where 29% of American households have less than $1,000 saved and only 18% of Americans have enough to cover 3-5 months of their household expenses if their income were to stop today.

As a country, many live on credit. The problem is, most individuals who have no savings many times are the same individuals who have no credit. Even if they do, take away their income and they most likely won’t have good credit either without a way to pay for all of that credit card debt, which is said to be about $5,700 on average now.

So what happens when we can’t pay those bills and payments? The cars are repossessed and the credit cards are closed. As the account goes into past-due status, the worst damage is done to your credit already in late payment reporting. 

Repossessions:
Once a car loan goes around 90 days past-due, they begin looking for you to pay the entire balance of past-due payments as well as the current month, or they begin to take action. That action is to call the local towing (also referred to as recovery) companies of their choice to begin searching for your vehicle. Of course, no warning is given when this happens, which is mostly in the middle of the night. The creditor then sells the car for as much as they can get at a car auction. You as the consumer are entitled to be notified of the intent to auction the car (when and where) and have the right to attend to re-purchase your vehicle. You also have a right to pay off the vehicle by paying the remaining balance plus recovery fees. Several other intentions and rights are required to be sent to you as consumer by right and if any of this process is skipped, it is effectively a violation that could benefit you in the long-run (we will talk about why in a minute).

Also, If you surrender your car voluntarily, it still counts as a repossession regardless of how it was obtained back from the creditor. They count it the same so they can get their tax write off and not take a complete loss. The only difference is that repossession fees tacked on by the towing company may not appear on the final balance of the account. They can still try to recover the difference of the price of the car sold in the auction and the actual balance owed on the account.

​The fun part: Even though the creditor will get full credit for this bad account off their revenue in the form of a tax credit, they will still possibly try to sue you for the difference in the money earned back from the auction and what was owed on your account. So, if you owe $20,000 on a car and they sell it for $12,000….You, the consumer without the money to make the payment foot the bill for the entire remaining $8,000, even though you still get no car out of the deal. Of course it won’t really hurt the creditor because they get their money back regardless, but any money that they can earn back off of you would be complete extra profit. This is why many will take the upfront extra profit of selling your account off to a debt-collector, who never had any skin in the game of extending you the credit. However, they buy your debt for pennies on the dollar and hope to gain big profits for harassing you daily and threatening to sue you for the balance. The awesome part is that if any of your rights during the repossession process were skipped or you were not informed at the right moment and time, you can use this against these crooked collectors. 

Charged-off Credit Cards:
Many types of debt can be charged off, but by far the most common types of debt when discussing charge-offs will likely be credit cards. When the bill is not paid, credit cards go into a past-due status and are then sent to collections. When collections efforts fail, sometimes they may sue the customer (called a judgment) or charge-off the account. Charging off the account allows the creditor to write-off that balance against their profits. What you will find however, is that even though the company gets compensated for that debt in the form of tax incentives, they will still seek repayment by selling off the debt to a collector and reporting that charged-off account to your credit report. By reporting the account to your credit report, they are hoping to double-dip by pressuring you to pay on that account, bringing even more revenue. It is likely however, that the original creditor has already sold the account for pennies on the dollar to a collection company and now they are hoping to reap benefits as well. You never owed this collection company a dime, however they are hoping that the guilt of not paying the debt in the first place turns into a hefty profit.
 
The Propaganda of the System
While it is important to pay back those we owe money to and remember that debt used incorrectly can be a burden on our families, allowing the system to manipulate us makes it even worse. There are several notices creditors are required to send you when repossessing a car and charging off the account. Also, you have to be notified of your rights when their intention is to auction the car. You are actually allowed to attend the auction by law or even pay off the balance owed on the vehicle and retain the vehicle. If any step was skipped in the process, that account can be legally challenged through the credit bureaus and it is very possible to see them deleted when disputed correctly. It is also helpful to know that depending on your state, there is a statute of limitations which basically prevents a company from suing you for the balance owed on the account and obtaining a wage garnishment after a certain number of years.  I have seen some states limit it to two years and others all seven years. This limitation goes for both secured and unsecured debt depending on the laws of your state.

Regardless of how you got in the position, know that you have basic rights and those should never be violated just because you feel guilt or pressure from debt. If you are in a rough spot in life and find yourself in a place where you cannot pay bills, remember that life’s basic needs come first. Safety, shelter, food, clothing has to come before creditors. Of course, by design, society is set up to pressure you and make you feel guilty about debts (of course they should be paid when possible), but we also live in an imperfect and fallen world where situations happen to all of us. Those who believe the lies of the system and have no empathy have often never gone through a situation where money was an issue. Just like with any other faith and moral based matter, ignore opinions and go with the Word of the Lord. His convictions will never steer you wrong. Demand the system respect your freedom and seek spiritual and financial redemption today!

If you need help with the credit restoration process today, contact us and become a partner. We would love to assist you!

Some helpful words from God to remember:
Proverbs 22:7 (NKJV)
“The rich rules over the poor,
And the borrower is servant to the lender.”

Proverbs 28:6 (NKJV)
“Better is the poor who walks in his integrity
Than one perverse in his ways, though he be rich.”
 
​
 
There are no attorneys on staff here at this ministry. No advice or laws stated on our site should be used to replace sound legal advice. If you have legal questions or are in need of legal consultation, please seek your attorney. God Bless!