You hit a rough financial patch and couldn’t make the payments on your auto loan. So, your car was repossessed and you’re scrambling to get it back. Sound familiar?
Fortunately, the process to recover your car may be easier than you think. But you need to know your rights and decide which approach is best before moving forward. Keep reading to learn more.
How Repossession Works
When you default on your auto loan, the lender may reach out with alternatives before repossessing the vehicle. You may receive a Section 80 Notice that specifies the amount required to bring the loan current. It also includes the last day to pay this amount before the creditor takes further action.
You will find that most creditors are willing to make payment arrangements if the hardship is temporary. But if you’re certain you won’t be able to catch on up the payment, you can return the vehicle to the lender. This is called a voluntary auto repossession.
However, this may not always be the case, especially if you live in a state that allows creditors to repossess vehicle the moment you become delinquent on the loan. Also, keep in mind that failure to obtain an adequate auto insurance policy could be considered defaulting on the loan and result in repossession in select states.
How to Get Your Car Back After Repo
If your car is repossessed, take the following actions:
Step 1: Know Your Rights
Why not call the creditor right away? It seems like the most sensible option, but it’s also a good idea to get an understanding of your rights to know how to best proceed. By law, the company hired by the creditor to repossess the vehicle cannot:
- Retain ownership of or sell any personal property that’s in the vehicle at the time of repossession.
- Breach the peace, which could entail “using or threatening to use physical force against you to take the car back [or] repossessing the car from your closed garage,” notes NOLO.
- Damage your vehicle or property when repossessing your vehicle. This is also classified as “breaching the peace”.
If you the lender has violated your rights or “breached the peace”, it’s best to seek legal counsel. his is also a viable option as you be able to sue and collect proceeds for damages.
Step 2: Call Your Creditor to Inquire About Getting the Car Back
The next step is to call your creditor. In most instances, you should expect one of the following:
Caught off guard by the repossession? In most states, the creditor will return the vehicle to you if pay cover the outstanding balance plus any fees that were incurred as a result of the repossession. (You should expect to at least cover the cost of towing, storage and attorney fees while the car was in the creditor’s possession).
But what if you were aware of the lender’s intentions to repossess the loan because they had reached out via phone or communicated in writing? In this case, you’d need to meet their terms and conditions of reinstatement in order to retrieve the vehicle.
Before you choose to reinstate the loan, run the numbers to ensure it’s the best move for your financial situation. If you anticipate having trouble keeping up with the loan payments, insurance, gasoline, and maintenance costs, it may not be a good idea to reinstate the loan as it could result in even more financial issues and damage to your credit report.
What if the lender doesn’t give you the opportunity to reinstate the loan? You may be able to redeem your vehicle by paying off the outstanding balance, fees, and any other costs associated with the repossession.
Buy Your Car at the Auction
In most instances, creditors auction off repossessed vehicle and use the proceeds to pay on the loan since it’s highly unlikely most who are in default can afford to redeem their loans. But if you’re set on getting the car back, you have the option to attend the auction and purchase the vehicle, but you’ll have to pay the asking price in full and cover repossession fees.
*Quick note: If your car hasn’t yet been repossessed but the threat is looming, reach out to your creditor right away and communicate your intention to bring the account current.
Explain your situation as they may have a hardship program you can participate in. Doing so not only saves you the boatload of fees that come with repossession, but it also helps protect your credit rating.
Step 3: Work on Rebuilding Your Credit
Unfortunately, a repossession is bad news for your credit report as it’ll result in a negative mark that stays for seven years. The good news is by taking the proper actions going forward, like making timely payments on all your other debts and reducing balances, your score will recover sooner than later.
Also, consider applying for a secured credit card or credit builder loan, like Self Lender, to show positive payment history on your report.
Quick note: you may be able to get the repossession removed from your credit report by following the advice included in this guide.
Do I still have to pay if I don’t get the car back?
If you’re unable to get the car back and it’s sold to another party, you’re still on the hook for the difference between the outstanding balance and proceeds from the sale. This amount is referred to as the deficiency balance. To illustrate:
|Outstanding Loan Balance||Sales Price||Deficiency Balance|
*Note: The creditor may tack on repossession fees to the deficiency balance.
What happens if you’re unable to reach an agreement with the creditor to pay off the deficiency balance or settle the balance for less than what’s owed? It will most likely go to collections and be reported to the credit bureaus and linger on your credit report for seven years.
What if I’m planning to file for bankruptcy?
Filing for bankruptcy could allow you to keep your car, even if you’re delinquent on the loan. Why so? Well, filing automatically makes it mandatory for lenders to seek permission from the court to repossess your ride. But you must file before the car is auctioned off to have the best shot at retaining ownership of the vehicle.
Dealing with a repossession can be scary, but it helps to know your rights and understand what options may be available to you so you’ll know what steps to take to get your car back.
Once it’s back in your possession, try to be proactive and work with your creditor during any financial hardships moving forward to prevent history from repeating itself.