How to Pay Off a Car Repossession Delinquency

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If you have a car repossessed, you'll be on the hook for any payments left on the financing contract, minus any proceeds from the auctioned car. This is called a deficiency. Paying a deficiency is important -- nearly as important as paying IRS tax liens. If you avoid the debt, you could end up in court. These deficiencies can be difficult to collect, so lenders often sue their delinquent borrowers for the amount due. To avoid this, it's important to pay the debt.

Things You'll Need

  • Account statement
  • 3 months' bank statements

How to Pay Off a Car Repossession Delinquency

  • Contact your former lender immediately after the repossession to find out how much the car sold for at auction.

  • Subtract the amount that the car sold for at auction from the remaining outstanding balance on the car loan contract. This is now due. You may need to pay any extra fees due to the auction costs.

  • Consider refinancing the outstanding balance -- especially if your lender raised the interest rate due to the repossession. You will no longer qualify for a secured loan -- since you no longer have a car to use as collateral -- but you may be able to qualify for a low-interest personal loan to pay off the remaining balance.

  • Review your bank statements and begin to categorize your expenses. Try to find areas to cut back. Some things that are completely non-essential include: entertainment (movies, cable TV), eating out and expensive clothing.

  • Use the money you save each month to make additional payments to the outstanding car loan.

  • Consider setting up automatic payments to ensure your payments come in on time. Use any additional money throughout the year -- tax return, bonuses -- to pay down the balance.

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