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Car Repossession and what you should know

Updated on April 21, 2014

Car Repossession

Car Repossession—Things You Should Know

Being in a situation where one’s vehicle has been, or will be, repossessed isn’t a fun dilemma to be a part of. Sometimes there are legitimate reasons why car payments can’t be made such as losing one’s job. Then there are times when irresponsibility plays a role. Regardless of why a vehicle is repossessed, taking responsibility towards getting a car or truck back into one’s hands is what many have done—you can do the same; but you need to know some of the legal “in’s and out’s” so the process can be as smooth and as stress-free as possible.

What A Lender Can Do:

Obviously, if one has defaulted on their car or truck loan, the lender has the legal right to take back that vehicle; after all, it was the lender’s money that went against the vehicle. In fact, the vehicle can be repossessed without notice and arrangements can be made to enter one’s closed garage, if necessary, to secure that particular piece of property. Every state has differing laws regarding repossession. Many people don’t realize that not having car insurance, too, can be legal grounds for the lender to arrange an authorized tow truck to be in front of one’s property for seizure. With that being said, however, the defaulter cannot be verbally threatened or be subjected to physical force during any repossession procedure.

Once a vehicle has been seized, it can be sold with the proceeds being applied to the respective loan; and in most cases, the defaulter has a right to be informed where and when the sale will take place. The sale must take place in a ‘commercially reasonable’ manner meaning the lender has to follow standard sales practices, though the lender is not obligated to accept the highest price, possible. If you’re thinking, “OK, I lost the car; life goes on—so what.” Yes, life will go on but it might not go in your favor since if the car is sold for less than the remaining balance on the loan, the loaner can come back and sue for the remaining balance. For example, if the loan was for $25,000 and the car’s owner had paid $5,000 of that and the car is sold by the lender for only $15,000, that leaves $5,000 dangling; and a suit for the remaining $5,000, which would be known as a ‘deficiency balance’, can come back to bite you.

Getting Your Car Back:

Yes, as stated, it is entirely possible one can retrieve their vehicle as long as it has not been sold, already, by the lender. There are several options available for retrieval:

1: Buy It Back:

Let’s assume you have been informed of the date and time of the auction of your vehicle. You can be present and bid on your vehicle. If your bid is successful, the vehicle can be yours once again, though you would remain liable for any deficiency balance.

2: Redeem The Vehicle:

Redeeming a vehicle means you can buy it back for the amount of the entire loan including any incurred fees or costs. So again, assuming the car is still available, if you win the lottery or have friends or relatives who are willing to lend you the cold cash, you’re good to go!

3: Reinstate The Loan:

Depending on the state where one resides, you can reinstate the loan but will need to follow specific guidelines, such as paying for repossession costs. You will be required to continue to make regular payments on the loan.

4: File For Bankruptcy:

If one files for bankruptcy before any sale, it will prohibit the lender from selling off the vehicle without court permission. This will put the vehicle on hold for a while, pending the outcome of the bankruptcy filing and can offer additional time to accumulate necessary funds or allow one to cure the arrears through the bankruptcy. The word ‘arrears’ pertains to a legal term regarding the part of a debt that is overdue after missing one or more payments. The amount of the arrears is the cumulative amount from the date on which the first missed payment was due.

Finding a reputable attorney who can sit down with you and explain what one could expect regarding a Chapter 7 or a Chapter 13 Bankruptcy would be a very prudent thing to do. Bankruptcy doesn’t have to feel like the end of the world; and for some, if offers a fresh new start.

Be Proactive:

If you’re biting your nails fearing your vehicle payment will lag behind, or even if you are already a bit behind, one thing can be done, immediately--contact the lender and explain the situation. Lenders have flexibility; and depending on how merciful any given lender might be, they can lower your interest rate or even lower the payment amount. They have no desire to become entangled in a vehicle-repossession any more than you do; and by offering sincerity and earnestness, you just might be able to sidestep the embarrassment and emotional hassle that a repossession can create.

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