What can I do about a possibly illegal car contract?

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What can I do about a possibly illegal car contract?

The car was repossessedfor being 11 days late and the note was paid the day it was repoed. Now they want the full amount of the loan. The contract says you are in default if you don’t pay when due, even if you die you still owe the note. It also says that you are in default if you file bankruptcy. Is that right?

Asked on June 6, 2011 under General Practice, Mississippi

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

This might not be an illegal contract:

1) Loans have to be paid when due; failing to make a payment in full on time IS default, and the company may take action, such as repossession. Furthermore, it is legal for the note or loan/financing agremeement to have an acceleration clause--that is, it all comes due when there is a default.

2)  A loan may have a clause that it must be paid in full, by the estate, on the death of the borrower.

3) A loan also may make--and commonly does make--various actions, such as filing for bankruptcy, constitute default, such that the lender can seek repossession and/or payment of the remaining balance. Of course, this does  not override the provisions or protections of bankruptcy law, so the borrower may be able to get a stay of collections, etc.

Short answer: a loan is a contract. It can have more-or-less any terms that are included in it, and not paying according to the terms, including when a payment is due, is a violation or default.


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