Facts on Car Repossession

If you fall behind on car payments, the car may be repossessed.

Creditors have the right to repossess a vehicle if the owner falls behind on the payments. If an individual is leasing a vehicle and falls behind on payments, the leased vehicle can also be repossessed. Repossession can damage your credit report, and it can be very inconvenient to find yourself without transportation.

Siezing the Car

When a person falls behind on car payments, the creditor can repossess the vehicle at any time. This can happen after even one missed payment, and the creditor is not required to notify the individual of the intent to repossess the vehicle. The creditor is allowed to enter personal property to repossess the vehicle.

Selling the Car

The creditor has the option to resell the repossessed vehicle to cover the debt. The owner may be notified of the sale depending on state law. In some cases, the individual can buy back the car by paying the balance owed on the vehicle or by bidding on the car if it is sold at a public auction.

Other Facts

Creditors may not break any laws when repossessing the vehicle. For example, they may not harm the individual or damage property or make threats to do so. Some states prohibit the creditor from entering a garage to retrieve the car. Any personal property inside the car may not be sold and must be returned to the owner.

Paying the Loan Balance

In some cases, the sale of the vehicle may not cover the balance owed on the loan. The creditor is permitted to file a lawsuit to obtain the money owed. In addition, the creditor may also charge the individual for repossession costs and attorney fees. If the vehicle is leased, the creditor may charge early termination fees if they are included in the contract.

Preventing Repossession

The best course of action is to prevent repossession from occurring. Many creditors are willing to negotiate payments and due dates if the customer is openly communicating with them. If this is unsuccessful, it is possible to have the vehicle voluntarily repossessed, which can reduce the amount owed to the creditor by reducing their expenses.

References

• FTC: Vehicle Repossession
• FTC: Building a Better Credit Report
• Credit Collections and Repossessions
• FTC Repossession Guide