My Car Got Repossessed. What Do I Do?

A car repossession can be a difficult and unexpected event. Understanding the process and your available options can help navigate the aftermath and determine a path forward.

Immediate Actions After Repossession

After a car repossession, take immediate steps to gather information. First, confirm the repossession to ensure the vehicle was not stolen. Then, contact the lender to verify the repossession and inquire about the department handling repossessed vehicles.

When communicating with the lender, have your account number and vehicle details available. The lender is typically required to provide notices following a repossession, such as a “Notice of Repossession” or “Notice of Intent to Sell.” These notices contain information, including deadlines, lender contact details, and the vehicle’s location.

Retrieve any personal belongings left inside the repossessed vehicle. Lenders and repossession agencies are generally prohibited from keeping or selling personal property found in the car. Contact the repossession company or lender to arrange pickup, documenting all items and their value. Also, gather loan documents, such as the original loan agreement and payment history, to understand your rights and options.

Understanding Your Rights and Lender Obligations

After a car repossession, consumers have specific rights, and lenders have obligations. The “right to reinstate” allows you to get your car back by paying all past-due amounts, including missed payments, late fees, and reasonable repossession costs, bringing the loan current. The “right to redeem” involves paying the entire outstanding balance of the car loan, along with all associated fees and expenses, to regain ownership.

Lenders are generally required to provide written notice of your right to reinstatement and redemption, specifying the amounts needed and the timeframes. These notices often have limited validity periods, sometimes as short as 10 to 15 days.

If you do not reinstate or redeem the vehicle, the lender typically sells it to recover the outstanding debt. Before selling, the lender must provide a “Notice of Sale,” which may be combined with earlier notices. This notice should include details such as whether the sale will be public or private, and if public, the time, date, and location of the auction. The sale must be conducted in a “commercially reasonable manner,” meaning it must align with accepted commercial practices to ensure a fair price.

Options to Recover Your Vehicle

If your vehicle has been repossessed, you have specific options to attempt its recovery. One path is reinstatement, which involves bringing your loan current. Contact your lender to obtain a detailed reinstatement quote. This quote will include all past-due payments, accumulated late fees, and various repossession-related costs such as towing, storage fees, and administrative charges.

Once you have the amount, arrange for payment within the specified timeframe. Upon successful payment, the loan is reinstated, and you can coordinate with the lender for the vehicle’s release. Obtain documentation confirming the reinstatement and terms for pickup. Maintaining timely payments after reinstatement is important, as another default could lead to a subsequent repossession.

Another option is redemption, which requires paying the entire outstanding loan balance, including principal, accrued interest, and all repossession-related expenses. Request a full payoff amount from your lender, encompassing the remaining loan balance, towing fees, storage fees, and any other costs incurred since repossession. Securing these funds can be challenging, but if successful, you will own the vehicle free and clear.

In some situations, particularly if bankruptcy is being considered, a reaffirmation agreement might allow you to keep the vehicle. This agreement, typically used in Chapter 7 bankruptcy, obligates you to continue making payments on the car loan, effectively removing that debt from discharge in bankruptcy. While this allows you to retain the car, it also means you remain personally liable for the debt, even after bankruptcy proceedings conclude. This option requires court approval, and the court may review your ability to afford the payments.

Addressing the Deficiency Balance

If your repossessed vehicle is not recovered and is sold by the lender, you may face a “deficiency balance.” This amount represents the difference between what you still owed on the loan (including repossession, storage, and sale costs) and the price the lender received from selling the vehicle. For example, if you owed $10,000 and the car sold for $7,000, you would still owe the $3,000 difference, plus applicable fees. Lenders can add various expenses to this balance, such as towing, storage, auction fees, and sometimes legal or attorney fees.

After the sale, the lender is generally required to send you a notice detailing the sale amount and the calculation of any deficiency. The lender will then pursue collection of this balance, which can involve sending demand letters and initiating collection efforts. In many states, if you do not pay, the lender can pursue legal action, potentially leading to a lawsuit and a judgment against you. A judgment could result in measures like wage garnishment or liens against other property.

A repossession and any resulting deficiency balance can significantly impact your credit score. Repossessions are typically reported to major credit bureaus and can remain on your credit report for up to seven years from the date of the original delinquency. This negative mark can cause a substantial drop in your credit score, potentially by 100 points or more, making it more challenging to obtain future loans or credit.

To address a deficiency balance, you have several options. You might negotiate a settlement with the lender for a reduced amount, or establish a payment plan to pay off the balance over time. It is important to keep meticulous records of all communications, payments, and agreements made concerning the deficiency.