What Happens After Repossession of a Vehicle: A Practical Guide

Getting a car can be exciting. Unfortunately, life happens, and some people have trouble keeping up with payments. This can lead to having your vehicle repossessed.

Having one’s car repossessed is stressful and unfortunate. However, everyone should know their rights and the best next steps. We’ll discuss the best practices you can try if your car is repossessed.

What Happens After Repossession of a Vehicle?

After a car is repossessed, the lender usually sells the vehicle. The proceeds from this sale are meant to cover your outstanding balance and repossession fees. There should be a short gap between the repossession date and the actual sale. The lender is legally obliged to provide you with a notice of the sale and redemption period so you can reclaim your vehicle.

Your Rights After a Car Repossession

Even if your car got repossessed, you’re still afforded some rights. If you find yourself in this awful situation, here’s what you need to know:

The Car Loan Company Doesn’t Have to Send a Notice

Every state has laws on car repossession, so the regulations depend on where you live. While some state laws mandate that the auto loan company is to send a written notice, others base it on the contract. If it’s a voluntary repossession, there’s no need for a notice because you already consented to repossessing the vehicle.

The Auto Loan Company Can’t Take the Items in the Vehicle

Let’s say you left your bags or laptop in the repossessed vehicle. You have the right to reclaim your personal belongings, and the lender can’t sell your things immediately. Some states mandate that the borrower be provided a list of items and instructions on claiming their belongings. If the lender sells your stuff without giving you the chance to reclaim it, you can file a complaint.

On the other hand, this rule doesn’t include the accessories you might’ve installed in the vehicle. The lender has the authority to sell these accessories through a public auction or private sale.

Your Property Shouldn’t Be Damaged

While the repo company can take away your vehicle, they’re not allowed to damage your property. If the car is parked inside your garage, they can’t break it down to forcefully get your vehicle. You can seek legal assistance from a lawyer if your property gets damaged while your car gets repossessed.

Lenders Can’t Threaten Nor Use Force

Repo agents can’t take away your car or vehicle if they breach the peace in the process. Breaching the peace means threatening you or using force while repossessing your vehicle. They can’t trespass on your property or remove the car after you tell them to stop.

If this happens to you, you should record all communication with the lender, repo company, and other relevant parties. These count as evidence you can use when filing a complaint for breach of the peace.

What Happens if Your Car Gets Repossessed? 

Once your car is repossessed, it will most likely be sold at a public auction or private sale. If the vehicle gets sold for less than what is owed, you may be sued for the difference, which is commonly known as a deficiency balance. You might also be charged for applicable fees if the money collected from the vehicle sale isn’t enough. Unfortunately, you might still owe money even if you have already had your car repossessed.

What to Do After Getting a Vehicle Repossessed

If you’ve missed a payment and your car has been repossessed, what happens next? Here’s what you need to know and the steps you can take to handle the situation.

Confirm Why Your Vehicle Was Repossessed

You might’ve missed payment, which prompted your vehicle to be repossessed. However, you shouldn’t simply assume. After all, each state has laws and regulations on car repossession. There might be a chance your vehicle was wrongfully towed. It’s well within your rights to ask why your car was repossessed. That’s why you should contact your lender to set the record straight.

Determine If You Can Have Your Vehicle Returned

More often than not, the lender might be open to returning your vehicle if you pay the remaining loan balance. Before the car is sold at auction, the lender has to notify you that it’s being sold after a few weeks or months. You can reinstate your loan and negotiate a new plan during this period.

However, it should be highlighted that the repossession will remain in your credit report even if you choose this route. Your new payments will be reflected if you negotiate a deal with the lender.

Verify If You Still Owe The Loan Company Money

There might be instances wherein the proceeds from the repossessed car sale don’t cover the money you owe plus repossession costs. You might still owe the lender a deficiency balance. This balance is the difference between the amount owed for the loan secured and the amount the lender obtained from selling your collateral. In this case, the vehicle is considered the collateral.

You might get sued and have to pay legal fees if you don’t confirm you owe money. It would be ideal to verify if you still have to pay anything to lessen your problems.

Special Considerations for Active Duty Service Members

The Servicemembers Civil Relief Act (SCRA) protects active-duty service members from having their vehicles repossessed without a court order. Lenders must first obtain court approval before proceeding with repossession.

To qualify for this particular protection, the service member must’ve made at least one monthly payment to the lender. Moreover, the loan agreement should’ve been signed before you entered military service. This SCRA protection enables service members to focus on serving the nation with less financial and legal stress.

Conclusion

Everyone should know their rights and what to do when their car gets repossessed. While this unfortunate incident might cause stress, you should be aware of your rights.

If you’re a service member actively serving the country, you should activate SCRA protections. SCRACVS can help you get the evidence you need to have your SCRA rights invoked. Click here to sign up at SCRAVS and verify the active duty status.

FAQs

Can you get your car back if it’s repossessed? 

Yes, you can get your car returned if you pay the money you owe in full. You can also reinstate the loan and negotiate a new deal with the lender. However, the repossession will still be reflected in your credit report.

Do you get repossessed immediately after missing car payments?

No, it depends on where you’re from. Select states permit borrowers a period to pay the money they owe before their car gets repossessed. In some states, you can get repossessed after missing a single payment.

What is a breach of the peace?

Breaching the peace means a repo agent or company threatens or uses force while repossessing your vehicle. They can’t trespass on your property or remove the car after you tell them to stop.

What is a deficiency balance?

A deficiency balance is an amount after the amount owed for the loan secured is subtracted from the amount the lender obtained from selling the collateral. In this case, the vehicle is considered the collateral.

How long does it take to get your car back from repo?

You can have your vehicle returned as soon as the lender accepts your payment and grants you clearance to pick it up. It would be best to confer with your lender to verify the timeline.

What are my rights during the repossession process?

The repo agent can’t take your belongings while repossessing the vehicle. They can’t breach the peace or sell the car immediately after repossess. They can’t damage your property as well.

What happens to my credit score after a vehicle repossession?

Your credit report will incur significant damage if you have a repossession in your records. This negative mark will remain on your credit report for up to seven years from when you missed a payment.