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I defaulted on an auto loan April 1, 2012, the bank

(Mendicino Savings Bank, in California)...
I defaulted on an auto loan April 1, 2012, the bank (Mendicino Savings Bank, in California) never repossessed the truck ( I owed @ $16-17K on the loan at the time). The bank says they never put the loan to collections (or when I called to find out WHO had the loan as of last month they said it was not in collections that they were handling it internally. I now live in Arizona (truck is in driveway, unused, where I live). I have been told that the statute of limitations is 4 years in California. What options do I have with this situation now that the statute of limitations is up? I would like to repair my credit, do not want to further harm my credit and am looking to buy a house in the near future. I have also been told that the truck can be registered now, is this accurate and can a repossession still happen?I contacted the bank last month, and they want $18,000 lump sum to settle (they said it was $22,000). I do not have that much and have been told by a credit specialist that .40 on the dollar is the target on this loan ($8800) to settle it. I have also seen people have wanted to keep their credit intact for house loans paying more (like 60 -70% for a "paid as agreed" or close to this to keep their credit intact for a loan). About 18 -24 months ago I went to Chase bank to apply for a credit card, a credit report was done that day as well, the defaulted auto loan appeared on the credit report but it was about to fall off.
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Answered in 7 minutes by:
3/12/2018
LegalGems
LegalGems, Lawyer
Category: Consumer Protection Law
Satisfied Customers: 13,651
Experience: Research Attorney; Private Practice; Attorney Mentor; Mediator
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Hello! I will be reviewing your question and posting a response momentarily; if you have any follow up questions please respond here. Thanks!

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Thank you for your patience;

pursuant to CCP 337 the lender has 4 years to act per the statute of limitations, which begins to run from the date the action accrued (ie the date of default).

That is for written contracts.

However, out of state trips by the defendant may extend the statute of limitations, so if the defendant was absent from the state then that would be tacked on to the aforementioned 4 years.

This is pursuant to CCP 351 and case law such as O'laskey v. Sortino 224 CA3d 241

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Customer reply replied 4 months ago
Thank you for your response. Yes, I am aware that it could be considered that additional time could be tacked on, as per Arizona written contracts are 6 years, that the statute of limitations could be extended for out of state trips as you mentioned. What I am looking for are the options with the situation once the statute of limitations is up in April with the defaulted auto loan and even the auto AFTER the statute of limitations is up on April 1, 2018 (which will then be 6 years from date of original defaulted auto loan. Including what is possible with the truck that is sitting in my driveway. I am looking in the near future to get a house loan and I do not desire to harm my credit.

Thank you;

Normally the default will remain on the credit report for 7 years;

The truck can be registered and the consumer may wish to do a voluntary surrender but that is almost as negative from a credit reporting issue as a repo. Please see:

https://www.experian.com/blogs/ask-experian/the-impact-of-a-voluntary-vehicle-surrender/

Once the statute of limitations is up the lender may sue in court as the statute is used as a defense (as opposed to a bar). So while the lender will not be able to collect in court often times the consumer will wish to settle in order to clear their credit report.

Normally that will appear as "paid in settlement" or "partial payment" if reduced and that does have a negative impact as well.

Additionally if any of the loan is forgiven the lender will write off that amount as a business loss and send the consumer a 1099c (often comes as a surprise) and the consumer has to report that as taxable income.

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But legally one cannot force a lender to accept a certain percentage, though they often accept between 40-60% of the outstanding balance, possibly more if the loan is no longer collectible.

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Customer reply replied 4 months ago
Can the truck be repo'd after the statute of limitations is up?
Customer reply replied 4 months ago
I ask as you stated the truck can be registered.

the statute of limitations is a defense to a lawsuit but I could not find any authority stating it is a bar to the underlying obligation; furthermore the title will still show a lien so it will be difficult to transfer title until the lien is paid off.

http://www.courts.ca.gov/9618.htm

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Customer reply replied 4 months ago
What is a bar? And does that mean a repossession is still possible after the statute of limitations is up? Also, would a credit report provide me with more information? If ask, is there a recommendation of waiting until after the statute of limitations is up on April 1, 2018?

A bar means a party can use the statute of limitations as a defense so that the court would dismiss the case with prejudice if it has expired.

Yes, repossession is possible as long as the debt remains unpaid unless the contract states otherwise.

Yes, a credit report would provide information as to how the lender deems the loan - but not all creditors report to the credit bureaus.

Once the statute of limitations expires the benefit is that the court will not rule in plaintiff's favor if the defendant successfully argues the statute of limitations has run.

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Customer reply replied 4 months ago
Is it recommended to get the credit report before the statute of limitations is up in April, does it matter when I get it?

No, that has no bearing on the statute of limitations.

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