Legalities

Legalities, a weekly column that appears in the Help section of the Southern Illinoisan, is a free service of the Self Help Legal Center. You can visit the Southern Illinoisan website at: http://www.southernillinoisan.com

Q: I bought a used car earlier this year and was making monthly payments on it. The car never really ran that well and one day it just stopped running altogether. I had it sold for scrap and only got a couple hundred dollars for it, so I stopped making my monthly payments. Now the finance company that gave me the loan has been harassing me about the payments and has threatened to repossess the car. Since the car no longer exists, do I really have anything to worry about? Why should I make the payments when I don't have the car? My feeling is that they have taken enough of my money.

A: Let's start from the beginning.

First, you may not have had the right to have the car "sold for scrap." Only the owner of the car has the right to have a car sold and depending upon the terms of your loan, the finance company not you may have been the legal owner of the car. Most of the time the business which loans you the money to purchase a car, a mobile home, or a house retains the title to the property until the loan is paid in full. If this is true for your situation, you should have obtained the permission of the finance company before you had the car sold for scrap.

Second, whether you were within your rights to sell the car or not, you still are obligated to make your loan payments as in almost all cases, your obligation to make payments is not conditioned upon the existence of the property.

For example, let's say that I purchase a television using my credit card and the very next day it is announced in the Southern Illinoisan that all televisions are switching to HDTV at the end of the year. If I throw the television out the window, it doesn't mean that I get to stop making payments on the credit card.

Similarly, unless there is some paragraph in your loan agreement that gave you the right to stop making payments if the car was salvaged for scrap, you will still have to make payments even if the car does not exist.

Finally, just because the finance company cannot repossess the car, it does not mean that they don't have other options. They can sue you in court for the unpaid balance on your loan, and they can also report your failure to make payments to a credit-reporting agency -- which would hurt your ability to get credit in the future.