What is Repossession?
In repossession, the bank or leasing company takes the vehicle from the borrower who has fallen behind on payments, often without prior notice. The lender may send a driver to collect the car, or they may take it using a tow truck. In some cases, the lender can remotely disable your car so that you cannot drive it until the matter is resolved.
When is Repossession Allowed?
To borrow money or lease a car, you must agree to specific terms. For example, you agree to make monthly payments on time and to maintain sufficient insurance on the vehicle. If you fail to comply with these requirements, the bank (or leasing company) has the right to take the car.
Consequences
In addition to losing the car, your credit will be affected, and you may owe significant fees. Repossession, whether you eventually get the car back or not, appears on your credit reports for seven years and can lead to decreased credit scores. We will discuss these issues in detail below.
Your Rights
The lender may have the right to take your car, but you also have rights. The specifics vary from state to state and from lender to lender, so be sure to read your agreements carefully and check with local consumer advisors. If you or your family is in the military, additional rules may apply.
Private Property
Lenders can reclaim a vehicle parked on private property, but state laws generally restrict them from “breaching the peace” while doing so. For instance, repossession agents cannot damage your property to access the vehicle. They usually cannot destroy locks to gain access to your garage, nor can they use physical force (or threaten it) when taking your car.
Sale Price
If your car is taken and sold, the lender must sell it at a “commercially reasonable” price. It does not have to be the highest possible price, but the lender must make an effort to obtain fair market value for the vehicle. Why? The proceeds from the sale will go to pay off your debt, so it would be unfair for the lender to repossess the vehicle and sell it to someone else.
Deficiency
Things do not necessarily end after repossession. If the lender sells your car, the proceeds will go toward your loan balance. In many cases, the car is sold for less than you owe, so your loan remains unpaid. The amount you owe after the vehicle is sold is called “deficiency.”
How to Keep Your Car
If you want to stop the repossession process and keep your car, there are several potential solutions (depending on your state and the terms of your agreement). Your lender or leasing company should explain your options to you, as well as the requirements and deadlines for each option.
Reinstatement
Want to hit the “reset” button? One option is to become current on overdue payments and pay the repossession costs, which will return your loan to its previous status. You will get your car back and will be in almost the same position as you were before the repossession (though your credit will still show the default).
Redemption
To wipe everything away, redemption may be an attractive option. This requires paying off the loan in full (all overdue payments, plus any remaining loan balance) and covering all repossession costs. In other words, you buy the car back and pay the legal fees. This is not easy for most people—if you had the money, you would be making the payments—but it may make sense if you have invested in customizations or made significant upgrades to your car.
Bankruptcy
If you file for bankruptcy, the repossession process may stop—at least temporarily. Your bankruptcy filing triggers an “automatic stay” that halts collection efforts by your creditors. However, the process is complex, and repossession can still occur with the court’s approval.
Auction
May
Lenders will sell your car either through a private sale or a public auction. The lender must inform you of what happens to your car after repossession. If the car goes to auction, you might try to attend and bid on the vehicle. If you win, you’ll get the car back and won’t need to continue making payments, but you may still owe a deficiency balance.
Personal Property
It’s likely you won’t know exactly when the repossession agent will come for your car. You might simply find that the vehicle has disappeared. If the timing is a surprise, there’s a good chance that some of your belongings will be in the car (like a toolbox in the trunk or clothes in the back seat, for instance).
Since those items weren’t part of the original contract, the lender generally doesn’t have the right to keep them. After repossession, the lender must notify you on how to recover your belongings. But hurry – you may only have about 30 days.
What about aftermarket parts and upgrades? The devil is always in the details (so read the fine print and check with a local attorney), but anything considered part of the vehicle is unlikely to be returned to you. If you have valuable wheels, suspension, and audio equipment, replace those items with standard parts before your car is repossessed.
FAQs
How many car payments can you miss before repossession?
In many states, lenders have the right to repossess your vehicle after just one missed payment. However, many lenders will give you a longer grace period, and many states require detailed notice before a lender can repossess your car. If you think you are going to miss a payment, contact the lender before it happens.
How long does a repossession stay on your credit report?
A repossession can stay on your credit report for seven years, starting from the date of the first missed payment.
Can you get a car loan after a repossession?
It is possible to obtain a loan after your car has been repossessed, but it will be harder, and you are likely to pay higher interest rates. If you need a new loan before improving your credit, consider asking someone with better credit to co-sign with you.
Was this information helpful?
Thank you for your feedback! Let us know why! Another
Sources:
– Federal Trade Commission. “Vehicle Repossession.”
– Consumer Financial Protection Bureau. “If I Can’t Make My Auto Loan Payments, Will My Vehicle Be Repossessed?”
– Commonwealth of Massachusetts. “What to Know if Your Car Is Repossessed.”
– Los Angeles County Consumer & Business Affairs. “Vehicle Repossessions.”
– Experian. “How Long Does It Take for a Repossession to Come off Your Credit?”
– Association of the Bar of the City of New York. “Repossession.”
– Experian. “Collection Accounts for Repossessed Car in Credit Report.”
– Consumer Financial Protection Bureau. “My Car Has Been Repossessed, and I Was Told It Will Be Sold. What Can I Do?”
– Justia. “Vehicle Repossessions and Bankruptcy.”
– Consumer Financial Protection Bureau. “What Happens If I Left Some of My Personal Possessions in My Vehicle When It Was Repossessed?”
– Georgia Consumer Protection Division. “Repo Company Charging to Return Belongings Left in Vehicle.”
– Experian. “Can You Buy a Car With a Repossession on Your Credit Report?”
Source: https://www.thebalancemoney.com/repossession-when-the-bank-takes-your-car-315103
Leave a Reply