Getting a Repossessed Car Back
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This article will explain the process of how to get your car back after it has been repossessed. Every state has laws that affect the repossession process. These laws determine how quickly a lender can repossess a car once you miss payments.
Written by the Upsolve Team. Legally reviewed by Attorney Andrea Wimmer
Updated October 1, 2021
This article will explain the process of how to get your car back after it has been repossessed. Every state has laws that affect the repossession process. These laws determine how quickly a lender can repossess a car once you miss payments. Some states let lenders take a car back after just one missed payment. You have options available to you after your car has been repossessed. You may be able to get your vehicle returned while also getting a better payment plan to repay your auto loan. Alternatively, you can surrender the vehicle, redeem the car loan, or file bankruptcy to give you some time to consider all your options.
What Happens When Your Car Is Repossessed?
Car repossession can be a sudden, swift, and inconvenient process. In some cases, it can happen after you become as little as 30 days behind on your payments. Car loans are a classic example of a secured loan on personal property. The law allows secured lenders to take back your car when you stop making payments. Repossession is the legal process of taking back a car after a borrower misses payments.
Before a lender can lawfully repossess your car, there are a few things that must happen first. The procedure differs depending on the laws in your state. Some states allow a lender to repossess your car immediately after the first missed payment. You may not find out about the repo until the repossession company’s tow truck is in your driveway.
In other states, creditors are required to wait an extended amount of time set by law before taking a car back after you miss payments. These states may also require a car lender to send you a notice of default after any missed loan payments, or any very late payments.
Once a lender has the right under state law to take your vehicle back, it can send a repossession company, yes, the repo man, with a tow truck. State laws regulate what a repossession company can and can’t do when trying to take your car back. This information should be outlined in your loan agreement.
The law allows a repo man to enter your property to take a car from your driveway, if the driveway is unlocked. The lender’s repossession company may not do anything that would be considered a breach of the peace. This includes breaking into a locked area like a garage.
After the car is repossessed, the auto lender is required to send you written notice. This document should inform you that your car was repossessed, the full amount that you owe on the car loan, late fees, towing costs, storage fees, other applicable repossession costs, and additional fees. The lender must give you a deadline to pay the full amount if you want to keep your car. If the car is to be sold at a public sale, it must also inform you of the time and place of the sale.
A car lender likely won’t stop trying to collect what is owed once your car is repossessed. Even after your car is repoed and sold, you may still owe the lender a deficiency balance. This balance represents the difference between the amount that the car is sold for at auction and the current balance of the original auto loan, plus fees, etc. Unlike a car loan, a deficiency balance is considered an unsecured debt. Your creditor, whether it’s the original lender or a collection agency, will try to collect this amount by suing you. Never ignore notice of a lawsuit! Notice will be served in the form of a summons and complaint.
If you don’t respond to the complaint by filing what is known as an answer, the court can award the car lender or collection agency a default judgment. Once a creditor has a court-awarded judgment, it becomes authorized to use additional tools to collect the debt owed. It can garnish your wages, or even get a bank levy to take money directly from your accounts.
Car repossession can affect your finances in other ways. It will appear on your credit report, which may cause your credit score to fall. If you apply for a new loan or credit card, you may be denied or be charged a higher interest rate than you would have before the repo.
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What Are Your Options To Get Your Car Back After Repossession?
Once a car is repossessed by a lender, borrowers still have options. Generally, to get the car back, you’ll have to pay the lender some amount of money. This usually involves an amount that makes you current on the amount you owe. After the reinstatement of the car loan, the creditor will return the vehicle. This also means returning to a schedule of monthly payments to pay the remaining balance of the auto loan. It may mean agreeing to a new payment plan to get the loan current.
Alternatively, filing for bankruptcy allows you to benefit from the automatic stay. This will temporarily protect you from creditors, including your car lender, from doing anything to take your car back during the life of the bankruptcy case. You can use the bankruptcy process to sort out your finances, keep your car, and get a fresh start.
Redeeming Your Car
You can try to settle the debt by redeeming or paying off the rest of your loan. This process can be expensive since you must pay any repossession fees in addition to the loan balance. Repossession costs, including towing and storage fees, can total, at the very least, a few hundred dollars.
Redeeming your car means you’re paying a lump sum to take your car back, meaning that you won’t owe the lender anything. Paying a lump sum may be difficult under your financial circumstances unless you have other property you can sell or access to untapped income. But you might be able to negotiate a lower amount than the full balance due.
If you don’t have the full amount the lender wants, you might be able to refinance another loan to pay the redemption amount. If you decide to refinance, you should carefully consider your financial situation and your ability to take on a new car loan. The last thing that you want to do is to place yourself in the same situation all over again.
You can even redeem the car if you choose to file a bankruptcy case. A Chapter 7 bankruptcy allows you to redeem the car while a Chapter 13 bankruptcy may allow you to pay the value of the car instead of the balance of the car loan.
You could try to buy the car at the public auction. This means paying the deficiency balance, which is the difference between the full amount of the balance owed on the loan, including total costs, and the sale price of your car at auction. You’ll also be responsible for the costs of the public sale.
Avoiding Car Repossession
Just because you miss one or two car payments, repossession of your car may be avoidable. There are ways to successfully prevent the repossession of your car before it happens. You can try to work with your car lender by asking for some time to delay one or two payments.
An alternative is to sell your car to another person in a private sale. You may be able to get more money than the lender would at a public sale. This might give you more money to pay your amount owed.You may then want to consider voluntarily surrendering the car to avoid repossession and related costs. Keep in mind that if you do, the lender will sell your car and credit the proceeds to your account. You’ll still be responsible for any deficiency balance.
There are situations where it may be a good idea to voluntarily surrender your car. If your car is “underwater” - you owe more on your loan than the car is worth, surrender may make good sense. If your car loan has a high-interest rate, surrender of the vehicle can avoid these costs.
Even if your interest rate isn't that high, a voluntary repossession of your vehicle may be a good idea if you can't easily make your car payment each month. Surrender may make sense if the car is not in good condition and will require costly maintenance and repairs. Finally, you may simply not want the car anymore.
As mentioned, you may want to refinance your car loan. It’s always a good idea to consider whether there are loans available that have more favorable terms like lower interest rates. If you can’t afford to keep the car, consider whether you can sell it and replace it with something less expensive.
Bankruptcy can help you avoid repossession through the automatic stay. An additional benefit of filing bankruptcy is that you may be able to keep your car while successfully managing debts in addition to your car loan. Upsolve offers a free web app that can help you decide whether bankruptcy is the right option for your overall financial situation.
Both Chapter 7 and Chapter 13 bankruptcy provide useful tools that may make avoiding repossession possible. One tool is a reaffirmation agreement in a Chapter 7 case. This allows a bankruptcy filer to keep their car by preventing the car loan from being discharged in the bankruptcy case. You “reaffirm” the loan so that it survives the bankruptcy case and remains in effect. A reaffirmation agreement is useful when you are current on your car loan, despite having financial problems that necessitated filing bankruptcy. You may need your car to go to and from work. This makes getting your car back a necessary part of solving these problems.
A Chapter 13 bankruptcy case allows you to “cramdown” your car loan under certain conditions. This means that you pay your car lender what your car is worth rather than the loan balance. You are, in essence, cramming the value of the car down the lender’s throat. This may result in you saving thousands of dollars. A bankruptcy attorney can tell you whether your car qualifies for a cramdown.
Even if your car wasn’t in danger of repossession before filing, if your monthly income is not enough to easily make timely payments every month going forward, it may be in your best interest to surrender the car and get a fresh start. If you give the car back during your bankruptcy case, you’ll be relieved from paying the remainder of the loan balance. Even if the car sells for less than what you owe, bankruptcy will let you discharge the deficiency balance.
Repossession happens when you stop making payments on your secured loans. These types of loans are used to buy things like homes, motor vehicles, and large appliances. When you miss payments, the creditor can take back or repossess the property.
A threat of repossession gives you more than a few things to consider when it involves your car. If you want to keep your car after it’s repossessed but aren’t in a position to pay the delinquent amount of your loan, you may want to consider filing for bankruptcy. Bankruptcy will force your car lender to return your vehicle and give you some time to consider your options. It may just be time to surrender your vehicle if you’re having trouble making payments. A lawyer can help you figure out what options will best suit your unique needs.