Defenses and counterclaims Lawyer Manual

Creditor keeps but doesn't sell the repossessed car

After a repo, a creditor Someone who is owed money must decide whether to keep the property or resell it. If the creditor decides to keep it or doesn’t resell it according to law, then they cannot go after the debtor A person who owes money to someone else for any deficiency. If a creditor uses a repossessed vehicle, the law says he has kept it.

Other defenses to deficiency:

• If the automobile was a lemon or had significant problems with its operation, the debtor may have a breach of warranty defense;
• If the creditor promises to forgive the debt if you voluntarily return the car, that is an accord and satisfaction, preventing any deficiency;
• Check to see if a deficiency lawsuit was filed more than four years from the date of default. If so, the debtor has a statute of limitations defense.

If the improper notice or commercially unreasonable resale

• The defense. If you can show either that the creditor failed to give a proper resale notice or failed to resell in a commercially reasonable manner, the debtor has a defense to a suit or claim for a deficiency. In this case, the law presumes that the value of the car is equal to the outstanding debt. Under this presumption, no deficiency would be owed. But, if the creditor can show in court that the value of the car when repossessed was less than the remaining debt and can show the resale was commercially reasonable, then the debtor still owes the deficiency. See 810 ILCS 5/9-625.
• The counterclaim A claim in a court case brought by the responding side (defendant). It is against the side who started the case (plaintiff). . Again, if there is either an improper resale notice or a resale that is not commercially reasonable, then 810 ILCS 5/9-625 of the Uniform Commercial Code permits the debtor to sue for actual damages Money awarded to replace damages the plaintiff suffered and statutory damages against the creditor. Statutory damages are equal to the finance charge plus 10% of the cash price of the secured property. The counterclaim is available for an improper notice even if the resale was otherwise commercially reasonable. If there are multiple debtors, such as a husband and wife, each may be able to get damages assessed against the creditor. Such a counterclaim frequently may be as much as the deficiency, and the parties may both just walk away as a "wash."

Creditor threatens to take household goods

For a variety of reasons, it is unlikely that a creditor is going to repossess a debtor’s household goods, furniture, or personal items. This is true even if the creditor gets a court judgment An official decision by a court that ends the dispute between parties on the debt. If a creditor threatens to take something valuable, like a color TV or jewelry, or something of personal value such as a family photo album, the debtor should not necessarily be concerned unless the property is leased or purchased under contract from a “rent-to-own” company. "Rent-to-own" companies will frequently repossess household goods under contract.

Protecting household goods

To prevent repossession, the debtor should not let the repo man into the house. The debtor should be advised to politely, but firmly, tell the repo man that he or she will not consent When someone gives permission for someone else to do something to their entering the home. The debtor should also advise their landlord An owner of property who rents it out to a tenant and family members not to let them in, either. Any attempt to come into the home without an invitation is unlawful. They should call the police (and a lawyer Someone who represents clients in courts or who gives legal advice ).

Reasons why creditors do not repossess household goods:

• Most goods are not valuable enough to make it worth it for the creditor to incur the cost necessary to take them, such as repossession costs, storage and selling expenses;
• A debtor does not have to let a repo man into the home, and they cannot break in; and
• The Federal Trade Commission has a rule that prohibits creditors from taking non-purchase money security interests in most household goods (there is no such prohibition on taking goods for which the creditor has a purchase money security interest, i.e., where the goods themselves are purchased on credit and the debtor puts up those same goods as collateral Property a person promises to give up if they do not repay a loan ). If there is no security interest in the goods, before taking any household goods, the creditor must get a court judgment and a turnover order directing the county Sheriff A county officer who can serve people with summons. They can evict someone with a court order. to seize the goods from your home.
• If there is no security interest in the goods, before taking any household goods, the creditor must get a court judgment and a turnover order directing the county Sheriff to seize the goods from your home.