When you cannot pay your car bill, your car will most likely be impounded. Many states do not give consumers advance notice of car repossession, and repossession can also be done without a court order. Usually, after 30 days of non-payment of the car loan, the car will be repossessed. Of course, this sudden car seizure can be a nightmare for you. Well, in this article we will explain some information about vehicle repossession, including the reasons for repossession, the steps in the repossession process, and how you can get your car back after it has been repossessed.
Reasons Why Repossession Happen
Before knowing the reasons why vehicle repossession happens, you should know that there are two types of loans. The first type of loan is a secured loan. This is a secured loan taken out to purchase a particular item. Examples of secured loans are car loans or home loans. Then, the second type of loan is an unsecured loan. This is a loan that is not secured by any property. Examples of unsecured loans are medical bills, credit card bills, and student loans.
So, why does a vehicle repossession happen? Repossession happens because you as a car borrower do not pay your car loan bill. If you feel that you have not paid your car loan, then be prepared for a recall to occur. Well, this process of taking back the vehicle is called repossession. For your information, each state has its own laws and rules regarding the repossession process. They have their own rules, such as when a car company will impound a car after you stop or fall behind on your car loan payments. In California, lenders can initiate the repossession process after a consumer has missed one payment. For those of you who live in California, if you fall behind on your car loan payments within just 30 days, then do not be surprised if your car will be repossessed immediately.
How Does Repossession Work?
The process of repossession begins with non-payment of the car loan. In short, if you do not make payments or are late with your car loan payments, then your car is in danger of being impounded. Again, remember that each state has its own rules regarding the process of car repossession. If you live in California, make sure you are not late with your car loan payment even once. Otherwise, it is certain that your car will be repossessed soon.
According to research, some states have more protection for consumers who do not or fall behind on car loan payments. In some states, creditors must wait for some time before they hire a repo company to seize the car. Meanwhile, in some other states, creditors are allowed to repossess the car if the consumer is late in making car loan payments. Once the payment is missed, then the creditor is required to send you a letter stating that you are in default. Some states may not send the consumer any notification letter until the consumer sees your car impounded and towed by a truck. Obviously, it will hurt you more if your favorite car is suddenly repossessed without any notice.
What Are the Repo Man’s Rules When Trying to Repossess Your Car?
When you fall behind on your car loan payments, the creditor will exercise its right to repossess your car. Usually, the creditor will work with a repossession agency to seize your car. They will assign a repo man to track down your car and retrieve your car, with a tow truck. Each state of course has its own rules regarding what repo man can and cannot do when trying to retrieve your car.
When Repo man is trying to repossess your car, they cannot do anything that would be considered a violation of the law. This includes:
- Repo man is not allowed to break into your garage which is locked. If they forcefully break into your garage and take the car, then you have the right to sue the Repo officer.
- Repo man should also not prevent you from retrieving your personal belongings left in the car. They must give you time to take all your personal items from the car.
- Repo man or tow truck drivers should not threaten you with arrest. They must also inform the police before taking over the car.
- Repo man must not use violence or physical force to remove you from the car.
In addition to having your car impounded, you will also have to pay repossession fees. This includes the cost of the tow truck driver. Therefore, never ignore the repo man. Never run away as it will only harm you. Speak nicely to the repo man if you want to negotiate your car loan.
Notice of Car Repossession
After successfully repossessing your car, the creditor will usually send you a repossession notification form. The document or form contains some information such as:
- Notification that your car has been repossessed
- Amount of money you must pay
- Other fees include late fees, storage fees, and towing fees.
For your information, some states allow consumers to repay their car loan by paying all the car loan debt, including the car repossession fee. Therefore, if you want to keep your car, the creditor must give you a deadline to pay your car loan bill.
Car Lender Has the Right to Conduct a Public Auction
How sad it is if your car must be repossessed. If you are currently experiencing this, stay patient and find the best solution. After the creditor has successfully seized your car, they usually conduct a public auction. They will sell your car at a public auction. If you want to attend the public auction, you can ask for information on when and where the auction will be held. However, usually the creditor will also tell you information related to the public auction, including the date, day, and place of the public auction. Each state has its own rules regarding public auctions. States require car loan companies to hold these public auctions in a reasonable manner. In most cases, confiscated cars are not sold at fair market value, which means that the sale price of your car will most likely not cover all your debts.
Debt Collection Lawsuit
After your car has been impounded, it turns out that your misery does not stop there. Do not be happy just yet, because chances are you still owe the car loan company. It is worth noting that anything not covered in the public auction is called a deficiency balance. Well, that deficiency balance will become your debt, which is an unsecured debt. If you do not pay this unsecured debt, then you could be sued by debt collectors.
To get this money, the collection agency will sue you. Be calm when you are sued by a debt collector. If you receive a legal demand letter, never ignore the letter. If you are asked to appear in court, then appear in court in response to your lawsuit. And, give a good reason for the debt. If you do not file something, or do not respond to the lawsuit filed by the debt collector, then you will regret it. The debt collection agency can take a default judgment against you. With this court order, debt collection agencies have a powerful tool to collect the debt. They will be able to cut your wages. Even worse, they can make levies to take money directly from your bank account. Of course, you do not want it to occur, right?
Impact of Car Repossession
Of course, there are various impacts of repossessing a vehicle. Not only will you not have a vehicle to commute in, which will make it difficult for you for example to get to work or to take your kids to school, you will also have a bad credit score. Once your car is repossessed, it will show up on your credit report. Your credit score will be bad. Next, when you try to take out a car loan, mortgage loan, or open a new credit card, you will most likely get a higher interest rate than before. Even worse, you may lose the ability to take out another loan, either a car loan, mortgage, or other money loan. Therefore, it is important that you always maintain your credit report.
The Ways to Get Back Your Car
We very understand how stressful you are once your car is repossessed. However, you can still get your car back even if it has been repossessed. So, how do you get your car back after it has been seized by a creditor?
Here are several ways to get your car back:
Pay off the rest of loan
To get your car back, you can pay off the remaining balance of your loan. This also includes repossession fees and late fees. Yes, indeed, this will be a little more expensive than you might expect. For your information, repossession fees, including towing and storage fees, known as loan redemption, can amount to several hundred dollars.
Reinstate the loan
You can also reinstate the loan. However, this depends on the laws applicable in your state. With reinstatement, you do not have to pay the entire loan amount, you are only required to make the loan current again. This will certainly ease your financial burden. However, remember that you still must pay all the arrears, including repossession fees and late fees.
Try to buy the car at a public auction
Usually, creditors sell repossessed cars at public auctions. If you want to get the car back, then you can try to buy the car at a public auction. You will usually receive a notice of sale from the creditor first. However, if you do not receive a notice of sale, you can ask the creditor for information regarding the auction of your car. Try to ask for information about the date, day, and place of the public auction. Make sure you have the money to get your favorite car back. However, you still must pay the remaining debt, which is the difference between the total bill and the selling price of your car. Do not forget to pay the public auction fee.
Additionally, if you are considering bankruptcy, then you can also try to get your car back through redemption or reinstatement as part of your bankruptcy case. Consult a local bankruptcy attorney to find out whether you are eligible to file bankruptcy and whether or not this is the right option for you.
Several Alternatives to Involuntary Repossession
When your finances are in a bad place and you can’t afford to pay your car loan bill, then it’s time to give up your car. Instead of having your car seized suddenly by debt collectors, it is better to sell the car immediately. You can sell the car to your friend or anyone through a private sale. That way, you will get more money to pay off the car loan. Also, you won’t have to deal with public auction fees or repossession fees, which can be costly. Therefore, selling your car through a private sale is a good idea.
Also, to ease your mind, you can also talk to the creditor about voluntary repossession, where you will return your car and stop paying the remaining car loan. Once you talk to the creditor, then the creditor will sell your car and credit your account with the selling price. We think this is also a great alternative solution. This way, you won’t be required to pay the repossession fee. However, remember that you still have to pay deficiency balance.
Finally, you can file for bankruptcy. This way, you can figure out how and when you will pay your car loan. Both Chapter 7 and Chapter 13 bankruptcy can provide an automatic stay. If you successfully file for Chapter 7 and Chapter 13 bankruptcy, then creditors cannot do anything to repossess your car while you organize your finances. Whether you want to take this alternative solution or not is up to you.
