If your car or other vehicle was repossessed by the bank, that may not be the end of it. Under Arizona law, the bank may have the right to sue you for the deficiency (difference between what was owed and what the car sold for at repo auction).
Unfortunately, because of the types of auto loans that were made in recent years and the ensuing recession and economic crisis, many cars have been repossessed while “upside down.” When this happens, the bank may come after you for the deficiency balance, but they have a limited time to do so.
The Statute of Limitations to Sue for a Repossessed Car is 4 Years in Arizona
The statute of limitations is a law that limits the time someone has to sue you for a specific type of claim. Normally, a typical breach of contract case will have a six year statute of limitations in Arizona. This is governed by A.R.S. 12-548. Some banks may try to claim that this same statute of limitations applies to auto repossession lawsuits, but they are wrong.
A different set of statutes called the Uniform Commercial Code (UCC) governs auto repossessions in Arizona. Specifically, A.R.S. 47-2725 governs deficiency lawsuits for a repossessed vehicle. The relevant part of this statute says:
A. An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued.
So the next question becomes when does the cause of action accrue – when does the time clock start ticking? There are at least two possible interpretations. The first one is that the claim accrues when the debtor stops paying on the car (from the first missed payment). This is the interpretation that we believe makes the most sense. The lender clearly knows the loan is in default at the time payments stop. So it should be 4 years from then.
But the other interpretation (the one the banks like) is that the claim accrues upon repossession auction. That is because the repossession, and subsequent auction, is what fixes the amount of deficiency. Once the repo auction occurs, the deficiency amount is known and the lender can pursue the debtor based on that amount. The lender will argue that they did not know if there would even be a deficiency until that auction occurred. Therefore, the lender says that the time period should run from the repossession auction date.
The reason this distinction is important is because the car loan may have been in default for months or years before the repo auction.
Other Defenses to an Auto Repossession Deficiency Lawsuit in Arizona
Even if the statute of limitations has not run on your claim when you’re sued, you may have several other defenses. In Arizona, the bank has to follow very strict repossession laws.
In particular, A.R.S. 47-9601 and related statutes require that the bank follow certain notice procedures and conduct the auction in a “commercially reasonable” manner aimed at achieving fair market value for the vehicle. If the bank cuts corners and sells the car for significantly less than it’s value, you may use this as a defense. Here is a partial list of other defenses that may apply to an auto deficiency lawsuit:
- Accord & Satisfaction
- Statute of Limitations Expired
- Prior Discharge of Debt
- Double Recovery
- Failure to State a Claim Upon Which Relief Can be Granted
- Lack of Standing to Sue
Debt Buyers Suing for Auto Repossession Deficiency
Many times, the bank you had your car loan with won’t be the entity that actually sues you. This is because the bank may sell the debt to a third-party debt buyer. Original creditors like Arizona Central Credit Union may keep the debt in-house and sue you directly. But debt buyers like Autovest, LLC and others regularly acquire, or claim to acquire, debt from other creditors and then try to collect or sue on it. With debt buyer lawsuits, there may be problems in their documentation. It may be difficult or impossible for a debt buyer to prove they actually own the account.
If you’ve been sued by the bank or a debt buyer for auto repossession deficiency, give us a call for a free consultation. We have handled numerous repo and debt buyer cases for clients. We can quickly evaluate your defenses and options so that you can make the best decision possible.
Remember, if you’ve been sued and received a Summons you only have 20 days to respond to the lawsuit properly. If you don’t, they can get a default judgment and garnish wages, bank accounts and more.
Free consultation – call 602-761-5900.