When Can My Car Be Repossessed
If you lease or finance your car, it isnt technically yours until you pay it off its your lenders property. The laws vary by state, but your lender holds the right to repossess your car when you:
- Fall behind on car payments. In some states, lenders can seize your car right away, but youre typically not in default until youre 90 days late.
- Fail to buy or renew car insurance per your loan or lease contract. Most lenders require you to maintain full coverage car insurance. Plus, you need minimum liability coverage before you hit the road in most states.
- Breach your loan agreement in some other way.
- Default on your car title loan. If you use your car as collateral in a car title loan, your lender can repossess your car if you miss too many loan payments.
What is force-placed car insurance?
If your car insurance lapses and you have a car loan, you may be forced to get force-placed car insurance. Your lender purchases car insurance for you if youre uninsured, typically at a more expensive cost for less protection. This insurance is also called force-placed, lender-placed or collateral protection insurance.
The best way to avoid force-placed insurance is by staying insured or getting reinsured quickly if you do have an accidental lapse in coverage.
My Car Was Repossessed What Happens Next
Once your car gets repossessed, you can attempt to get it back or let the lender sell it at auction and pay any remaining debt. Although were not lawyers and cant give you legal advice, we can tell you what options you have after your vehicle is repossessed, and what your basic rights are.
What To Do When Your Car Is Wrongfully Repossessed
Everyone wants to own a car and move around as they wish without having to depend on public transport. It is very stressful when the car that you have been relying on, is repossessed for one reason or another, especially after making timely, regular payments.
Increased instances of repossessions have been observed in recent years. Some of these repossession occurrences are in fact, wrongful repossession. Wrongful repossession is when the collateral you put up for your loan is taken back by the lien holder, either illegally or by mistake.
Repossessions are matters between the borrower and the lender, and they are strictly private. Repossessors should respect your right to your privacy and not repossess your car from your private property without legal authority. When they do, they should demonstrate proper conduct and not use threats or trickery.
If you been meeting all agreed terms made with the lender and your car was repossessed, avail all your payment receipts before you contact the lender. Additionally, you can contact lawyers to advise you on the next step to take.
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Things To Do Before Your Car Gets Repossessed
The effects of the coronavirus pandemic have been especially burdensome on auto-loan borrowers. Unlike student loans and mortgages, there are no government-backed relief programs to cover a monthly car payment.
The result is most devastating for subprime borrowers — those with credit scores under 600. Serious delinquency levels within that group rose about 22% between the fourth quarters of 2019 and 2020.
If you miss even one payment, your lender technically can repossess your wheels.
So what can you do if you know youre in danger of having your car repossessed — or if its already been repossessed? Check out this guide to help you before, during and after car repossession to help you and your finances survive this bumpy ride.
Buy Back Your Car At Auction
If neither of these options works for you, your lender may keep the vehicle as compensation for your debt or resell the car to recoup its losses.
In some states, your lender must let you know about its plans. If the lender plans to sell the repossessed car at a public auction, it may be required to tell you the time and place so you can attend and bid on the car. The same goes for a private sale the lender may need to disclose the date of the transaction.
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Communicate With Your Lender
This is by far the best approach to staving off repossession. The key is to be proactive. This is true even if you havent missed a payment yet, but are worried you might be in danger of doing so. You may be able to work out a deal, but communication with the lender is key.
The big thing not to do is hide from this, Clark says. Because if you just dont tell them anything and youre not making your payments, they just proceed on a regular track of doing a repossession of your vehicle.
Remember, this isnt a negotiation since the lender holds all the chips. Its really just about being honest about your situation and seeing if the lender willing to work with you on a plan.
Instances When Your Car Is Wrongfully Repossessed
Violation of laws happens when repossession occurs illegally.
Repossession should follow specific guidelines and procedures. Otherwise, it leads to disputes between repo man and borrower.
- If the agent breaches the peace when repossessing your vehicle – If repossession agents violate the peace, the lender loses its right to repossess your car at that time lawfully. In such instances, the agent might be required to return your vehicle and pay any caused damages. In the repossession context, certain guidelines should be followed when taking your car. Agents cannot threaten you, can’t kick your door in when there are no trespassing signs up, use violence in any way, shape or form, or damage your personal property, touch or harm anyone, repossess the vehicle after you have instructed the repossession agent not to break any lock or gate, have the police present unless the finance company has a judgment against you among other things.
- When your payment was late but this wasn’t a problem before – In situations where lender agreed on changes in payment dates, the original contract terms might no longer be applicable.
- Missing personal items – The lender must return all personal properties that were inside your vehicle otherwise, if the lender refuses to cooperate, you might have a claim against him.
- When it was due to a lack of insurance, but you had coverage – The lender can’t take your vehicle if your insurance coverage didn’t lapse.
1. A paperwork inaccuracy or computer glitch.
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Consequences Of A Car Repossession
Unfortunately, there are times when you might find that you can no longer make your monthly payments on your leased vehicle. In that case your choices are: 1) voluntarily return the vehicle or 2) wait for the vehicle to be picked up .
In either case, the amount you still owe on your lease will be calculated by the lease company according to the terms written in your contract. If you voluntarily return your vehicle and pay the remaining balance, there is no negative affect on your credit. However, if you are unable to make monthly payments, its also not likely that you can pay off the balance.
The remaining balance on a lease will nearly always be more than expected. Its the realized value for the vehicle plus remaining payments, plus costs. Unless there was a relatively large down payment or trade-in at the beginning of the lease, the balance could easily be unaffordable. And it must be paid in full no more monthly payments.
If you cannot pay the balance due on your lease, the vehicle will be sold at a wholesale car auction and the amount, minus costs, will be applied to your balance. You will be billed for whatever remains.
Clearly, it is best to try to find a way to continue making monthly payments if possible. Some lease companies will try to work with you and help you find a solution. Its in their best interest, and yours, to avoid a repossession.
Canadian Auctions/potential Suit Against You
When a lender repossesses a vehicle, they will almost immediately sell it at an auction and apply the proceeds to the debtor’s loan. While there are auctions throughout Canada, one of the largest auctions in the country is the Toronto Auto Auction. When the lender applies the proceeds to your loan, he will note whether there is an additional balance due. Depending on the laws of that province, the lender may well sue you for the shortfall.
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How Repossession Can Affect Your Credit
Well, as you might suspect, having a repossession on your record is going to negatively affect your credit. Both a voluntary surrender and a repossession will remain on your credit record for seven years. In terms of how much damage will be done to your score, it will likely be significant. It is not only the repossession itself but also the fact that in order for your car to be repossessed, you will likely be very delinquent on your payments its really a last resort. Working with your lender instead of having to resort to repossession is always in your best financial interest. It might at least leave the door open with this particular lender if you need another loan in the near future.
Is My Lender Required To Offer Payment Arrangements
This common question has an answer that surprises most consumers: your lender isn’t required to offer you payment arrangements. While many lenders do offer payment arrangements, this is due to their internal policies and not a requirement under the law. However, it doesn’t hurt to call them up and find out what options are available.
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What Happens If Your Car Gets Repossessed From Title Loans
If you stop making your monthly payments on your auto title loan, your title loan lender might have no other choice than to repossess your vehicle. The individual title loan repossession procedure can be different from state to state, so you should discuss the logistics with your auto title loan agent if you have reason to believe that repossession might happen in your case.
Typically, when your car is repossessed, it is taken to a tow yard. The bright side of this is that most tow yards are surrounded by a massive fence and locked up at all times. This means that while your car is in the tow yard it is generally safe from being stolen or drastically harmed.
While this is happening, you and your title loan agent can discuss the issues that led to the repossession of your car. It might have been because your financial situation has changed, which made your payment plan unmanageable. Whatever the case may be, your title loan agent is always willing to work with you to discuss options that may be available.
If you are having trouble keeping up with your current payment schedule, a title loan refinance could be the answer to your problems! Call to talk about how you could potentially get better rates, terms, and even more money on your car title loan.1 If a refinance is an available option, you can avoid title loan repo and also get a great deal on emergency funding!1
Three Ways Repossession Could Hurt Your Credit
Loan default: Loan default means you failed to honor the agreement of the loan. If your payment is late by 30 days, you may be considered a defaulter. Bearing the fact that repossession is a hassle, the lender may not consider you in default until 90 to 120 days of late payments.
Otherwise, the lender should be more lenient if you have a good payment history. A defaulted vehicle loan will show on your credit score for a good seven years from the day of a missed payment.
Late payments: Any payment you make at least 30 days late drops your credit score. If you miss consequent payments, your credit reports will show both a 30-day late notice and a 60-day late notice. Repossession is stressful, and banks tend to show a bit of leniency when it comes to payments.
Repossession: Lenders generally repossess your vehicle not earlier than 60 days after you miss a payment. Most likely it will happen after 60 to 120 days of late payments â depending on the terms of the lender, repossession team, and contract terms of the loan. Generally, repossession adds its mark on your credit reports which stay affected even before repossession occurs and it can damage your score by more than 100 points
Moving On After Your Car Gets Repossessed
Having your car repossessed is a traumatic experience, but you need to treat it as a learning experience and begin improving your finances.
Start by determining how you can cut expenses in all areas of your life, including auto-related expenses. Driving a fancy, expensive car isnt worth tanking your finances. Opt for a less expensive car or an alternative method of transportation like carpooling to work and taking public transportation.
Your credit will likely take a significant hit too. Your delinquent loan may be sent to collections that can stay on your credit report for seven years. Its important you take steps to repair the damage. Pay your remaining bills on-time consistently and only begin taking on new lines of credit when you can safely afford them.
If youre struggling to pay other bills, you need to reach out for help immediately. Talk with your creditors to set up alternative payment plans and figure out ways to bring boost your income through a side gig or by changing jobs.
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Subprime Car Loans Repossessions And Your Credit
Any car loan or lease is subject to repossession if youre past due, but subprime car loans tend to be at higher risk for repossession than other auto loans.
There are a few ways subprime car loans, repossessions, and credit are all interconnected:
- Higher interest and payments: Subprime loans generally have higher interest rates, which lead to higher monthly payments. They also have higher fees, like documentation and late payment fees.
- Fewer late payment options: You might have fewer opportunities to reschedule car payments and delay any collection or repossession activities. This leads to additional costs for you.
- Negative credit impacts: The high rates and risks associated with subprime loans mean your credit is at greater risk of negative impacts on your score. Avoiding this is key to better rates in the future.
You want to avoid subprime loans when possible, work with your lenders if youre going to be late, and try to resolve repossessions before they happen.
Getting You Back On The Road
For nearly two decades, Auto Credit Express has been assisting car buyers with credit issues. And we can help you by matching you with a local dealership that can work with unique credit situations. You can get a good, reliable car and the opportunity to improve your credit just by making all of your loan payments on time.
The service that we provide is absolutely free, and our process is quick and hassle-free. Go ahead and fill out our simple and secure online car loan request to get started today.
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Repossessions And Chapter 7 Bankruptcy
One of the great things about Chapter 7 bankruptcy is many of your debts are discharged, meaning that you wonât have to pay them. Your personal liability on unsecured AND secured debt will be gone.
If you owe money on your repossessed car, this debt will be discharged with the rest of your unsecured debts. It doesnât matter if the repossession happened before or after filing for bankruptcy. Filing your papers will stop the collection agency from going after you for the rest of the auto loan if your car was repossessed.
Watch out! If you sign a reaffirmation agreement with the lender, you agree to continue making loan payments. You can still keep the car by signing a reaffirmation agreement, but you need to keep making payments. An important thing to think about: if you canât keep making car payments in the future, you may have to deal with vehicle repossession down the road. You would lose the car and your Chapter 7 discharge will not protect you from having to pay repossession costs because you reaffirmed the debt.
If youâre feeling lost in a sea of debt and are considering filing for Chapter 7 bankruptcy, see if Upsolve is the right answer for you! Upsolve provides free Chapter 7 assistance to qualified low-income individuals.