When times are tough financially, it can feel like you’re juggling an impossible amount of bills. The threat of car repossession may be a daily stressor in such circumstances. To learn more about how car repossession works, read through this article and find out what to do if your car gets repossessed.
What Does It Mean When a Car is Repossessed?
When a car is repossessed, it usually means that the borrower has missed one or more payments on their car loan payment. Unless you paid for your car outright, most vehicle purchases involve loans that allow you to pay for a vehicle over time. When you take a loan out for a car, you sign a legally binding agreement confirming you will pay the full sum of the loan on time. Payments are usually made in monthly installments.
If you miss a payment, the lender can rightfully repossess your car. A missed payment is defined as more than 30 days past the payment date. That said, most lenders don’t proceed with repossession until the borrower has missed two or three consecutive payments.
Depending on the lender’s tolerance, they may also reach out to you for an explanation or encourage prompt payment. If they’re unable to reach you or haven’t received an explanation and you’ve defaulted multiple times, they’ll likely repossess your vehicle. As such, it’s essential to reach out to the lender if you can’t make a payment on your loan to avoid repossession.
What Happens If My Car Is Repossessed?
Before a repossession, you’ll likely receive a notice of outstanding payments on your loan that you should pay or face repossession. This notice may come to you through phone, email or paper mail. Yet, when a lender decides to repossess your car, they can do so without warning.
After the repossession, it’s the lender’s responsibility to notify you of the repossession and any intention to sell. Selling notices often include information on what you must do to keep the vehicle. In general, the three types of such notices include:
- Acceleration notices: The lender issues this notice to the borrower, informing them of their defaulted loan and intention to sell. This notice also informs the borrower they have to pay the remaining loan balance. You can respond to this notice by negotiating an alternate payment plan, but you should do so immediately after receiving the notice.
- Opportunity to cure: This notice informs the borrower what they must do to keep the vehicle by a specific date and redeem the loan.
- Post-repossession notice: Lenders are legally required to provide a notice at least 10 days before they plan to sell the borrower’s vehicle.
To carry out the repossession, lenders typically contract repossession agencies to collect cars with outstanding payments. Repo workers start with your home address when coming to collect your vehicle. The Federal Trade Commission states lenders and repo workers cannot breach the peace when collecting your vehicle. What constitutes breaching the peace varies with different states.
If they don’t find your car at your home, they may look at your place of work or nearby grocery stores, finding such information through the lender. They may wait for you to pull your car out of the garage and follow you until you park and get out. Once you leave the car, the repo worker can retrieve it.
Common Questions About Car Repossession
Repossession can feel like you’ve been broadsided, so it makes sense if you have questions about the car repossession process. Here are some common questions consumers have about the car repossession process.
If My Car Gets Repossessed, Can I Get It Back?
It’s possible to get your car back after repossession. However, you have a limited amount of time to do so. Contact the lender soon after the repossession to discuss the terms of retrieving your car.
Getting your car back varies with each lender but usually involves paying off the remaining loan balance in full within a certain period. Some lenders may allow you to catch up on overdue payments to redeem the defaulted loan. If you’re unable to meet the lender’s terms for loan reinstatement, they will proceed to sell the vehicle and recoup their losses.
If Your Car Gets Repossessed, Do You Still Have to Pay?
Your lender may sell your car at an auction after repossessing your vehicle. If they don’t recoup the total cost of the vehicle, you are responsible for the remaining balance. The lender can take you to court if you refuse to pay. You will also be responsible for other fees associated with repossession, whether or not the lender recoups the total cost of the vehicle in selling.
My Car Was Repossessed. What Are My Rights?
Repossession laws vary state-to-state. Most laws prohibit repo companies from using force or threats to collect vehicles. They can collect your car if it is on your driveway without warning but not if it is inside a closed garage.
If you believe your car was wrongfully repossessed, you can file a legal complaint. Before doing so, review the loan agreement terms and consult with a consumer law attorney to see if the lender or repo agency violated your consumer rights or the loan agreement terms.
Any belongings inside your car at the time of repossession remain yours, and you have a right to retrieve them without cost from the repossession company within 30 days.
How Long Does It Take to Recover From a Repossession?
After the lender repossesses your vehicle and informs creditors, the creditor can send your loan to collections. If your loan ends up in collections, it could severely damage your credit and show up on your credit report for seven years.
How to Recover From a Repossession
After a lender repossesses your vehicle, your main option is to renegotiate a payment plan with your lender to bring the payments back up to date or pay the remaining balance in full. Still, you may want to weigh the pros and cons of getting your car back, asking:
- Will I be able to afford insurance, maintenance and gas if I get the car back?
- Do I have access to affordable and convenient public transportation?
- Is it worthwhile to file for bankruptcy and avoid repossession?
- Should I trade in my car for a more affordable option?
Since your credit takes a significant hit from repossession, recovering from repossession involves improving your credit score. While you’ll have to wait seven years before you’re fully cleared of the repossession, you can take steps to improve your score in the meantime. Make sure you pay other bills on time and minimize debt. If you do so, your credit score will be in great shape when the repossession comes off the report.
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If you’re interested in learning more about the car repossession process, we welcome you to visit our contact us page to speak with one of our repossession experts at Lift and Tow!