When You Can't Pay Your Debts FAQ

I might have to miss a car payment. Should I let the lender repossess?

No. Before your car payment is due, call the lender and ask for extra time. If you're at least six months into the loan and haven't missed any payments, the lender might let you miss one or two months' payments and tack them on at the end. If you don't pay or make arrangements with the lender, the lender can repossess without warning.

If your car is repossessed, you can get it back by paying the entire loan balance and the cost of repossession, or, in some cases, by paying the cost of the repossession and the missed payments, and then continuing to make payments under your contract. If you don't get the car back, the lender will sell it at an auction -- usually for far less than it's worth. In most cases, you'll owe the lender the difference between the balance of your loan and what the sale brings in.

If you are far behind on your car payments and can't catch up, you may not be able to afford the car. Think about voluntarily "surrendering" your car before the dealer repossesses it. This saves you from paying repossession costs and attorneys' fees. Ask for concessions from the dealer before giving up the car. A dealer might waive its right to collect the amount left owing on the loan or promise not to report the default or repossession to credit bureaus. For more on which payments you should make when you're strapped for cash, see Nolo's article Which Debts Must You Repay?

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