REPOSSESSION: WHAT HAPPENS NEXT?
Posted on: Nov. 28, 2017 in Car Loans

If you’re unable to make your car payments, you could end up losing you car to repossession. Having your vehicle seized can severely damage your credit. It can also make it very difficult to get to school or work, two things that enable you to earn money to keep yourself afloat. If your car is repossessed, it’s important to know what steps you can take to keep a bad situation from becoming worse.

Your Rights

Before we jump into what to do next, here are a few things you should know about repossession itself.

The laws vary from state to state, but in some states your car can be repossessed as soon as you miss one loan or lease payment. It’s important to know what the laws are in your area and, if you think you’ll miss a payment, to call the lender immediately.

If you had any items inside the car, in most states they cannot be sold. Depending on the state you live in, you may have to call the repossession company for a list of the items they retrieved from the car and in others they’ll need to provide that to you automatically. They’ll also have to let you know how what steps you can take to get your items back.

The repossession company may not “breach the peace” when seizing your car. This means they cannot break into or damage your property to get the car and they cannot commit violence against you.

Can I Get My Car Back?

Sometimes. The creditor may decide to keep your car or sell it privately or publicly. In some states, they must tell you what’s happening with your car and provide you with the location of a public sale. If it’s being sold privately, they’ll have to tell you the details of that as well.

You’ll have the option to buy the car, also known as “redeeming” it, by paying the full amount of what you owe including past due payments, the balance of the debt, and any expenses incurred during the repossession like storage, preparation for sale, and fees.

In some states, you may have the option to reinstate the loan by paying the past due balance plus fees and working with the creditor on a new plan.

What If I Can’t or Don’t Want to Get My Car Back?

Once the car is sold, you may think you’re in the clear on the loan. This, unfortunately, isn’t always the case. If the car sells for less than you owe, you’ll still be responsible to pay the difference. You’ll also be responsible for the fees we mentioned before. This is known as a deficiency balance. According to the law, the car must be sold in a “commercially reasonable manner,” so you are protected from a creditor selling the car for less than it’s worth.

Whatever you do, do not ignore a deficiency balance, as this is yet another debt that can be sent to collections and will pull your credit down. You can also be sued to collect the money.

Repossession can really wreck your credit, but you can recover from it. Doing what you can to resolve the situation and then working on rebuilding your credit will help you move on.

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