How a repossession can take placeAfter a repoIf you want a repossessed item backAvoiding a repo when you can't make a car payment
How a Repossession Can Take Place
- The buyer does not have to be notified before the repossession occurs;
- The creditor cannot commit a crime, use abusive language, enter a home without permission, or take an item if the owner physically resists;
- Cars can be towed from public or private lots;
- A car can be towed from the owner's driveway if no other car is moved, but a car cannot be towed from the owner's garage.
After an Item is Repossessed
If you have paid more than 60 percent of the amount of the loan, the creditor must sell, lease, or otherwise dispose of the item, unless the consumer signs a statement after the default which permits the creditor to keep the item in full payment of the loan. The sale must be held within 90 days of repossession. You must be notified of the time and place of the sale.
If you have paid less than 60 percent, the creditor may decide if the item is to be kept as payment for the loan or sold. You must be notified in writing by the creditor of what will be done. If the creditor chooses to keep the article, you have 21 days to protest in writing and demand the item be sold.
The proceeds from the sale go to cover the balance of the loan, and the costs of the sale and repossession. Any money which remains is returned to the buyer. If the proceeds of the sale do not cover the loan and expenses, the repossessor is allowed to sue the buyer for the full amount owed including repossession fees, auction costs and legal fees.
If You Want a Repossessed Item Back
You have the right to redeem the repossessed item up until it is sold or within 21 days of receiving notice that the creditor is going to keep it. The cost of redeeming the item will depend on the terms of the contract. You may be held liable for cost of repossession and attorney's fees.
Avoiding a Repo When You Can't Make a Car Payment
- Contact your lender as soon as possible. Be honest about the situation and why you aren’t able to make the payment. If you’ve been a good customer and made your payments on time in the past, your lender may be willing to defer a payment and allow you to keep the car. If you can reach an agreement to change your original contract, get those new terms in writing. Don’t wait until your loan has been turned over to a debt collector. By then, your lender has given up on you and it’s too late to negotiate.
- Refinance. You may be able to negotiate a lower interest or spread out the payments over a longer period of time, resulting in lower payments. The downside to a longer-term loan is that you’ll pay more interest. Compare loans from your current lender and others.
- Sell the car to pay off the loan. Determine how much you owe on the vehicle then check its market value on a site such as Edmunds, Kelley Blue Book or the National Auto Dealers Association (NADA) Used Car Pricing Guide (Pacific Northwest edition). If you owe less than the car is worth, sell it and use the cash to clear your debt. Before selling, review your financing agreement to see if the lender charges prepayment penalties for paying off your loan early.
- Look for ways to save more money. Are you positive you can’t make your payment? You may be able to cut household expenses by eliminating other services you don’t need. You might qualify for assistance programs to help cover groceries, utilities or prescription drugs. You may also benefit from credit counseling.
- Even if you return the car voluntarily, you still are responsible for paying any outstanding debt on the loan, as well as the lender’s cost of the repo, and your creditor still may enter the late payments or repossession on your credit report.
[Back to Top]
Credit Homepage | Credit Reports | Collection Agencies | Repossession | Securing Credit