What happens if my car gets repossessed?
by Steve Cypher on Monday, January 21st, 2008At Auto Credit Express, we get a lot of questions from customers asking if a repossession will affect their ability to buy another car. But first, you have to understand what a repossession is.
The bank owns your car until it’s paid off
Even though your car is sitting in the driveway, if you are making payments on it, it’s the bank that really owns it. If you look at the vehicle title, you will notice a “lien holder” section where the name and address of the bank are listed. Until you make your final payment and receive a “release of lien” letter from the bank, the car really doesn’t belong to you.
What if I can’t make my payments on time?
It’s important to keep the bank informed if you are having financial problems. By calling them and explaining the problem, you might be able to set up special payment arrangements. Depending on the way your finance contract is worded, the bank may have the right to repossess your car if they receive the payment one day late, so you will want to explain your situation. The bank also has the right to take the car without a court order, so if you do fall behind, don’t expect a letter in the mail beforehand.
What is the difference between voluntary and involuntary repossession?
In an involuntary repossession, the bank sends someone to seize your car. In an voluntary repossession, you take the car back, yourself. If you take it back yourself, you may avoid certain fees the bank will charge you if it has to come and get your car. The effect is the same and a voluntary repossession does not look any better on your credit report than an involuntary one.
What rights do I have if it is repossessed?
Depending on the state in which you live, the bank must notify you within a certain number of days when it will be sold. During this time, it may also be possible to buy back the vehicle for the balance owed plus any expenses incurred by the bank. You also may be able to reinstate the loan by paying the amount you are behind plus expenses.
Deficiency Judgment
If the bank sells the vehicle for more than the amount owed, plus expenses, you are entitled to the difference. If the vehicle sells at auction for less than the contract balance, the bank has a right to go to court and seek a judgment against you for the balance of the loan.
The Bottom Line
If you’re having problems paying your loan, call the bank and explain your situation. Remember that a repossession is a black mark on your credit history and can prevent you from getting a car loan – any type of car loan – for at least a year.
If your credit history does include a repossession, go to our web site at www.autocreditexpress.com. We have helped thousands of people in your situation reestablish their credit. You can also find out if you qualify for a car loan and even budget a car loan for your specific financial circumstances.
I WAS WONDERING I BOUGHT A USED CAR WITH NO WARRANTY I WAS NOT THINKING AT THE TIME& NOW IT’S BROKEN DOWN ON ME.I’M TIRED OF PAYING FOR IT AND FIXING IT WHICH I KNOW EVENTUALLY IT’S NOT GOING TO LAST ANY LONGER.IF I TAKE OUT ANOTHER CAR WOULD THIS STILL EFFECT MY CREDIT.
I’m not a lawyer and I don’t give legal advice, but if you’re asking my opinion, it really depends on what you plan on doing with the first car. If you pay off the first loan or trade the car in and it is paid off that way then no, it would not affect your credit. If the first car is not paid off and it is repossessed then it would affect your credit and your credit score would go down. The other thing that you have to consider - will a bank lend you the money on a second car? You may have to trade in the first car in order to get another loan. If you wait and the first car gets repossessed, it will be very difficult, almost impossible, to get a car loan if you have a repossession on your credit bureau.
WOULD YOU BE ABLE TO GET AN APARTMENT STILL IF THE REPOSSESSION ON YOUR CREDIT REPORT WAS NOT YOUR FAULT?
Our web site, http://www.autocreditexpress.com helps people reestablish their credit by getting a bad credit auto loan through one of our affiliated dealers. While I don’t have any experience with apartment rentals with bad credit and, again, I’m not a lawyer, I would suggest that you obtain a free credit report from one or all three of the credit bureaus. You can get more information on this by visiting the web site http://www.annualcreditreport.com. Even if the repossession was not your fault, if you were responsible for the loan as a borrower, co-borrower or co-signer, it will appear on the report,lower your credit score and you won’t be able to remove it. If this is the case, you can still add an explanation to the credit report regarding the circumstances of the repossession. This might help your case if you are hoping to rent an apartment.
I BOUGHT 2 CARS AND CAN NO LONGER AFFORD THEM. I LOST MY JOB AND FOUND A NEW ONE THAT DOES NOT PAY ENOUGH. I AM 2 MONTHS BEHIND ON BOTH CARS. I CONTACTED THE BANK AND THEY INFORMED ME THAT IF THE HAD TO REPOSSESS THE VEHICLES THEY WOULD SELL THEM IN AUCTION AND COME AFTER ME FOR THE DIFFERENCE. MY QUESTION IS, IF I FILE BANKRUPCY WILL I AVOID HAVING TO PAY THEM BACK?
I need to return my car back to the garage/bank,cannot afford to pay anymore, what can I do/what steps to follow.
Again, we cannot give legal advice, in our experience the deficiency balance on the loans would be included in the bankruptcy. If you file a chapter 7 bankruptcy you would not have to pay it back, if you filed a chapter 13 bankruptcy you would have to pay a portion of it back.
I AM WONDERING SOMTHING I HAD TO LET A TRUCK GO BACK. JUST COULD NOT AFFORD IT, IF I DONT SELL FOR MUCH AT AUCTION AND I OWE MONEY TO THEM. WHAT CAN THEY DO? IF YOU CANT AFFORD THE TRUCK HOW DO YOU PAY BACK MONEY OWED?
Elias,
The first thing to do is to contact the bank and ask them what you need to do. In most cases, banks have a lot where you can bring your vehicle to turn it in. In many cases, you can turn it in at a dealership. For example, if the car was purchased through Ford Motor Credit, you could turn it in at any Ford or Lincoln-Mercury dealer.
My car was repossessed and right know if in the collection agency, they don’t give any chance to pay in monthlypayments,and they put me in thelegal depsrtment, how can i do, I’m very scared and i dont want this go to the court, somebody can help me,please i need and advise,please answer at my email. Thanks
I lease my car in 2006 and I cant afford it anymore, what will it do to my credit. I will be turning it in no matter what, Janet
Can you refinance your car for a lower rate & payment after paying for a year?
Also, can you trade your car in to get a less expensive car? Thanks.
Donna,
We normally recommend that you wait to refinance your car until you are at least halfway through the loan term. The more payments that you’ve made, the better situation you’re in when it comes to equity in the car (loan to value). The better the loan to value, the lower your interest rate will be when you refinance.
The trade-in is really the same scenario. You can always trade in your car, it just depends on how much the car is worth as a trade-in versus what you owe the bank. If you owe more than the trade-in value, you could be paying for two cars with your next car payment (the negative equity from the first car, plus your new car). If your current car is worth more than the trade-in value, you’re in good shape, since you can use that equity towards a down payment on your new car.
My car was repossed this morning but i dont understand y because i’ve made my payments every month not on time but i’ve made them adn now they arent telling me anything …. dont know what to do ?
ED,
At this point in time, I would suggest that you contact a lawyer.
If I have 2 car loans and 3 cars, one of loans are current and the other is not. The car that is paid in full is only worth like 600 bucks and we only use it for wheelin, but even if we sell it, it wont pay off our debt. If I was to file chapter 7 bankruptcy, would I be able to keep the car that is still in good standing? Even though I have a third car paid in full. Would i have to sell the 3rd car that doesnt have a loan in order to keep my car that is in good standing? I dont know what to do.
Katie,
Your Yahoo address indicates that you are from Canada and I am only familiar with US bankruptcies. If you are actually a US Citizen, this would be my answer:
We’re not lawyers and we don’t give legal advice. That being said, you can “reaffirm” your debt on the car that is currently in good standing. This means that it is not part of the bankruptcy. If you continue to make your payments on time, the bank will have no reason to repossess it. As for your third car, no one here has ever heard of anyone having to sell a paid-off vehicle in order to settle bankruptcy debt.