After the repossession, a creditor in Illinois must send a notice to the consumer stating that the creditor intends to apply to the Secretary of State for a repossession certificate of title 625 ILCS 5/3-114(f-7)(1-4). With that notice must be an "Affidavit of Defense" form for the consumer to list any defenses which the debtor may have either to the repossession or to the amount of money which the creditor is claiming is due. If the debtor mails this Affidavit to the creditor by certified mail within 21 days, the creditor cannot immediately obtain the title from the Secretary of State. Instead, “the lienholder must apply to a court of competent jurisdiction to determine if the lienholder is entitled to possession of the vehicle.” 625 ILCS 5/3-114 (f-5) (2).
Without the title, the creditor/lien
holder cannot resell the car. The creditor will then have to either file a lawsuit, usually detinue or declaratory judgment
action against the debtor to settle
the matter, at which time the debtor's defenses will be decided. If the creditor files such a lawsuit, the debtor may end up owing more money for the creditor's legal fees if the court determines there was no basis for the defense. The creditor may seek to negotiate a settlement with the debtor instead of filing suit. Any negotiated settlement should be in writing. If the creditor does nothing after receiving an Affidavit of Defense, the debtor will have to go to court to ask for an award of damages or for the car back.
Resale and deficiencies
Creditors usually try to re-sell a repossessed car to collect on the car loan debt owed. If the amount the creditor receives at the resale pays off only part of the amount owed, the creditor usually will go after the debtor for the rest, called the deficiency. Debtors are often sued to recover the deficiency balance.
Because the creditor must meet many technical legal requirements in connection with the resale, there may be many legal claims and defenses available if the creditor slips up. If the creditor is seeking a deficiency, always check for the following:
- Was the repossession unlawful?
- Has the creditor kept the collateral or has he re-sold it?
- Has the debtor received a proper written notice of the intended re-sale?
- Was the sale conducted in a commercially reasonable manner?
- Are there any other defenses?
Notice requirements
If the creditor decides to resell the car, then the creditor must send the debtor a proper written notice about the intended resale, which can be either public or private. For a public sale, such as an auction, the notice must include the time, date and place of the sale. For a private sale, the creditor must state the date after which the sale will be held. The requirements of the notice are set out at 810 ILCS 5/9-613 and 5/9-614.
The purpose of the notice is to give the debtor a chance to redeem the vehicle before resale, to give the debtor a chance to find potential buyers for the vehicle, and to give the debtor a chance to observe every aspect of the sale to make sure the vehicle is sold for a fair price.
Other requirements of the notice:
- It must tell the debtor about their redemption rights
- It must give enough time to redeem or to find other buyers before the resale
- It must be given not only to the primary debtor but also to co-signers and guarantors
- It must be correctly addressed
- If it states the wrong information on the notice, such as wrong date or sale location, the notice is no good
- It must be written
- If the creditor learns that the debtor did not receive the notice and took no steps to correct it, the notice is no good
- A debtor must be sent a new notice if the sale gets rescheduled
Part of the Legal Professionals library, sponsored by Reed Smith
