Vehicle repossession is a stressful event that can cause individuals to feel violated and at the mercy of auto loan lenders. However, you do have certain rights as a debtor that you should be aware of. The most important take away when dealing with repossessions and auction sales is that there are several remedies, even if your vehicle ends up being sold at auction.
Deficiency Payments and Recovery Period
If you owe money to a creditor with your automobile as secured collateral, they have the legal right to take the vehicle back if you miss a payment. By not paying your auto loan payment on time, as agreed, you become “in default” on the loan. A creditor has the right to immediately take back their collateral, however, most companies offer a grace period that will allow you to get caught up with the addition of a late fee. Repossessed vehicles are typically given a period of recovery in which you will have a certain amount of time to pay the past due amount, in addition to, any recovery (towing) fees, and, in some cases, a deposit of one or two more car payments. The deposit is held by the loan company to be applied to your loan balance if you default on payments again in the future. If you are able to pay the money, the lender will notify you of where your vehicle is and notify the recovery company to release the vehicle back to you.
Repossession Sale for Default Auto Loans
If you can’t gather the necessary funds together to bring your vehicle loan current, the car or truck will be sold at auction. You will typically receive a notice at least 10 days prior to the repossession sale. Make sure you keep any and all correspondence from your lender, as these documents could be helpful if you end up being sued for any deficiencies in the loan. Filing a lawsuit is one way that a creditor collects the deficiency amount, however, some states prevent liability for deficiency balances if the total amount is under a few thousand dollars.
If Vehicle Costs More than Amount Owed
There’s plenty of information on the internet about deficiency balances due after an auto repossession, but what if the car will fetch more being sold that what you owe on your auto loan. In this case, you should do everything you can from keeping the vehicle from being repossessed and sold. If you can buy some extra time, you can sell the automobile yourself and use the proceeds to pay of the auto loan and keep the remainder of the balance.
Bankruptcy and Repossession
If you have fallen behind in your auto loan payments and haven’t been able to reach an alternative arrangement with your creditor, you may be able to prevent repossession of your vehicle by filing bankruptcy. When you file bankruptcy, the automatic stay goes into place that will prevent your auto loan lender from contacting you to collect the debt or repossessing the automobile. Additionally, by filing Chapter 13 bankruptcy, you can obtain immediate debt relief by being able to roll your missed payments into your three to five your payment plan and allowing you to pay back the debt over time.