If you return the car to the lender, the lender will likely sell it. It will apply the proceeds of the sale to your car loan balance, after reimbursing itself for the costs of sale and certain fees. However, often the sale proceeds aren't enough to cover your loan balance; the remainder of the loan amount is called the "deficiency."
The car loan lender can then demand payment of the deficiency. If you don't pay up, it can sue you, get a judgment, and then use various collection methods, such as wage garnishment or bank levies, to get paid.
If you still want to surrender the car, you can try to work something out with the creditor, like negotiating a reduction or waiver of the loan balance as a condition of returning the car. After all, you're saving the creditor the time and costs of a repossession and auction (granted, most of those costs would still be passed on to you anyway).
You might also want to consider selling the car yourself. If you can find a buyer who would pay at least as much as what the car might sell for at auction, then the lender might agree to the sale and waive all or part of a deficiency balance.
Even if the creditor won't cut you a break on the deficiency balance, surrendering the car might still be the best thing you could do under the circumstances. It could save you the extra costs and fees of a repossession, which the creditor can add to the deficiency balance you might owe later.
]]>I fell behind on my car payments, so the bank repossessed the car. As the repo agent was hooking up my car to a tow truck, I tried to get my things out of the car, including my laptop and iPhone. But the repo guy refused to let me get my property unless I paid him $20 as a “convenience fee.” Is that legal?
Probably not. While you might be liable for fees related to the repossession and auction of the car, a “convenience fee” is not one of them.
You're legally entitled to your personal property. The car loan lender must return that property to you because it doesn't have a legal interest in it. The lender has an interest only in the car, which served as collateral as payment for the car loan. This obligation extends to the repo agent and anyone else the bank hired to repossess and store the car. The repo agent should have let you retrieve your personal property before towing the vehicle.
The only exception to this rule is if the property was attached in some way to the car. For example, say a sound system was installed in the car so that you'd need tools to remove it. Then you probably wouldn't have been able to take it back, anyway. That's because the sound system became a "fixture" to the car, and fixtures become part of the car that the bank can legally take and sell.
If you haven't done so, call the creditor right away and make arrangements to get your items back. If it refuses, or if the items were lost or damaged during or after the repossession, then you might have a claim against the creditor for damages. You may also use that as a defense if the creditor later sues you for a deficiency judgment after the car repossession.
]]>I'm behind on my car loan payments. I think the lender might repossess the car. I'm getting a tax refund soon, which should be more than enough to pay off the car loan. I want to prevent my car from being repossessed so that I don't have to pay the extra fees. What happens if I try to hide the car from the repossession agent while I'm waiting for my tax refund to arrive?
Whether you can hide or lock up the car to buy yourself time to pay off the loan depends on where you live. In most states, taking these actions won't violate any laws, unless you do it with the intent to defraud the bank. For example, if you normally keep the car locked up in your garage, you can continue to do so. In some states, though, deliberately hiding a car from the repossession company is a crime.
In most states, a car loan creditor is permitted to come onto your property and take your car so long as it doesn't have to cut chains, break locks, or damage property in the process.
So, if you "hide" your car by parking it behind your house or garage, or in the woods on your property, the creditor might still be able to find it and repossess it. Similarly, if you "hide" your car by keeping the car in a neighbor's driveway or at your place of employment, the repossession company can still legally get it, assuming they know where it is. And in some states, doing this might be illegal.
But if you keep the car locked in a garage or behind a chained gate, the creditor can't repossess the car because it would be breaching the peace (damaging property). Again, whether you're allowed to do this depends on whether you trying to defraud the car loan lender.
But if you make it hard for the repo agent to get it, then the creditor may use another method to get the car back, called "replevin." Replevin can be just as costly as a repo, if not more so.
With replevin, the car lender files a lawsuit seeking an order from the court requiring you to give the car back. If you fail to abide by the court order, you might be subject to both civil and criminal penalties. The creditor can also get a money judgment against you, usually for the balance owed on the loan or lease, along with charges and costs.
Rather than dodge your creditor, you might be better off talking to it about your situation and deferring things until your refund comes. Creditors are often willing to work things out with a borrower, especially if that means they'll get paid soon. It doesn't hurt to ask your creditor for a break. You could save yourself a big headache, not to mention a lot of money.
]]>But whatever you do, you must act quickly; otherwise, you'll lose the opportunity to get the vehicle back. There's no hard and fast rule on how much time you have to get a car back before the lender sells it. Generally speaking, the lender must give you notice that allows a “reasonable time” prior to the sale for you to react and exercise your options. At least ten days' notice is usually considered reasonable. Your state's law may also be more specific about the timing of notices. For example, California requires at least 15 days' notice before the sale.
You can usually redeem the car at any time prior to the private sale or auction. To redeem, you pay the entire loan balance plus certain costs and fees. The notice of sale—which the lender should have sent you—will contain information about what you need to do to redeem, including a telephone number for you to call to find out the payoff amount and how to make payment.
The lender is required to send you this notice shortly after it repossesses the vehicle. Some states, like California, require notice within 48 hours after repossession. Regardless of the timing, the lender must give you written notice that gives you the information you need to exercise your right to redeem within a reasonable time before the car is sold.
During the redemption period, the lender may report the fact that the car was repossessed to the credit reporting agencies. If you redeem, your credit reports should be updated to reflect that information. But the report could also still indicate that the vehicle had been repossessed.
If you're allowed to reinstate the loan by state law or by the terms of your loan agreement, then you might have even less time to act. To reinstate the loan, you pay off the overdue amounts, plus certain costs and fees, to bring the loan current.
State laws vary on the amount of time you have to reinstate the loan. Typically, you're allowed only 15 days after the repossession to reinstate the loan. If your right of reinstatement is based on the loan agreement, then the time period might be more or less, depending on what the agreement says.
If more than five days have passed since the repossession and you still haven't received a notice from the lender, don't wait any longer. Contact the lender and obtain the information you need to redeem, reinstate, or bid on the car before it is sold.
If the lender didn't give you a required notice before selling the car, you could use this as a defense if it tries to get a deficiency judgment against you. If you have questions about your rights and options, consider talking to a local debt relief lawyer.
]]>In most states, you have to pay off the entire loan to get your car back after repossession, called "redeeming" the car. The balance you would need to pay to redeem the vehicle might include extra fees and charges, including repossession and storage fees, and even attorneys' fees.
You might also have a right to reinstate the car loan. To reinstate the car loan, you bring the loan current by making up all of the past due payments, including applicable fees and late charges, in one lump sum. Reinstatement could be an option for you if you can't pay the car loan off in full. You can reinstate the car loan only if your state's law allows it or if your loan agreement specifically states that you have this right.
If neither reinstatement nor redemption is an option for you, there's no harm in approaching the bank to negotiate a different resolution, such as a partial reinstatement and a new payment plan. The bank might even refinance the car loan if that's viable for you.
If the creditor isn't willing to work with you, then bankruptcy might be an option, depending on your financial circumstances. You might be able to get the car back if you file Chapter 7 bankruptcy or Chapter 13 bankruptcy. To learn more, see My Car Was Repossessed, Can Chapter 7 Help? and Can I Get My Car Back If It Was Repossessed Right Before Chapter 13?
However, filing for bankruptcy just to get a car back is rarely a good financial decision.
For more information about car repossession laws in your state, consult with a local debt relief attorney. If you want to learn more about filing for bankruptcy, talk to a bankruptcy lawyer.
]]>I'm late on my truck payments and am pretty sure that the bank will try to repossess it. I keep the truck locked in my garage during the day while I am at work. I am concerned that a repo agent might break into my garage to take the vehicle. Is that legal?
Not unless the bank got a court order first. Creditors are allowed to engage in self-help to repossess cars, but that freedom isn't without limits. If a creditor risks “breaching the peace,” it isn't allowed to repossess the vehicle. So, the repo agent can't use, or threaten to use, force or violence. It can't break locks or destroy or damage property in attempting to reach the car.
If the repo agent breaks into your garage to take the truck, that is breaching the peace. You can raise that as a defense if the creditor files a deficiency lawsuit against you. You may also be able to file a counterclaim for any damages that the bank or repo agent causes, including damage to your garage and locks.
To get past that locked garage legally, the bank will probably have to get a court order that requires you to turn the vehicle over. This is called "replevin." Keep in mind that if the bank gets a court order and you don't turn the truck over to the bank, then the local Sheriff might be the person breaking into your garage to take the vehicle.
For more information about car repossession and replevin laws in your state, consult with a local attorney.
]]>I'm less than two months behind on my car payments. But the bank repossessed my car today. They never gave me notice that they were going to take it. I've been paying on this vehicle for over three years. Is that legal?
As a general rule, yes. Most car loan agreements specify that the lender can repossess your car when you're late making payments. The lender usually doesn't have to give you notice that it plans to take your vehicle. But in at least one situation, you'll get notice ahead of time.
If you're in the military and have defaulted on a car loan, the Servicemembers Civil Relief Act (SCRA) provides you with special protections against the repossession of your car. The creditor usually has to go to court and get a court order before taking the car. You should get notice of that legal process. Though, some exceptions exist and there are a few additional details to consider.
In a few other situations, the lender might be limited in when it can repossess your car.
Your loan agreement should describe what will happen if you fall behind on your payments and how far behind you have to be before the bank can repossess the vehicle. Loan agreements often allow creditors to repossess a car if the borrower is just a month late on payments. You might even be one payment away from paying off the loan, but the bank can still repossess if you're late. Other agreements will give you more time before a bank can declare you in default and take the car.
If the bank had a pattern of accepting late payments from you in the past, then it might have waived its right to repossess the car when you were late again. You can raise this past acceptance of late payments as a defense if the creditor sues you for a deficiency balance.
Even if the bank wasn't required to give you notice before it repossessed the car, it still has to give you specific notices after the repossession.
]]>My car loan lender had my car repossessed. I had clothes, CDs, an iPod, and some other items in the car. In addition, I had previously installed a $500 stereo system. Can I get my things back?
If the repossessor takes your motor vehicle, you’re entitled to get back all your personal belongings inside of, but not attached to, the vehicle when it was repossessed. This means that you can get back your gym shorts, but not the $500 stereo system you installed. You are entitled to a removable radio, however. (Learn about how motor vehicles are repossessed.)
Act Quickly. Also, make sure you look at your loan agreement. Some say that you must make that request within 24 hours of the repossession. Although such time limits might not hold up in court, it’s safest to act quickly. (Learn about options to avoid a car repossession in the first place.)
How to get items back. Promptly contact the lender after your vehicle is repossessed and ask that your property be returned. Put the request in writing and list everything you left in the car. If the lender is uncooperative—which is unlikely—consider suing in small claims court.
If a repossessor took your personal belongings and refuses to return them, consider talking to a local attorney to learn about your different options.
If your car lender repossesses your car, van, motorcycle, SUV, or another motor vehicle, you’ll need to examine your goals and decide if it's worth paying for an attorney to help you. In some cases—say the lender repossessed your car even though you weren’t actually late on payments or you want to avoid a deficiency judgment—you probably need a lawyer to assist you. In other instances, like if you were late on payments but have money available and want to keep the car, it often makes sense to use that money to reinstate the loan or redeem the repossessed car rather than hire an attorney.
Below are some situations where you should consider hiring, or at least consulting with, an attorney if your car is repossessed.
If the lender repossesses the car while you're current on your payments according to the contract and not in default for some other reason, you might need an attorney to file a lawsuit to recover the vehicle.
Even if the loan agreement doesn’t give you a grace period for late payments, if the lender has accepted late payments from you in the past without declaring a default, or did other things to change the terms of the loan agreement—like changing the payment due date—your attorney can address this in the suit, and you might be able to get your car back.
Under the federal Servicemembers Civil Relief Act (SCRA), a lender must get a court order before it can repossess your car if:
The SCRA is extensive and complex. If you’re on active duty, an attorney can inform you about all of your rights under this law.
Once your car has been repossessed, the lender will most likely sell it at a public or private auction. If the proceeds from the sale don't cover the balance of the loan, the difference between the sale price and the total debt is called a "deficiency."
In most states, your lender can sue you to collect the deficiency. If the lender gets a deficiency judgment, it can generally get this amount from you by using regular collection techniques, like garnishing your wages or directing your bank to turn over funds from your account to pay the debt (called "levying" your account).
If you want to avoid or reduce a deficiency judgment, consider hiring an attorney to raise a defense to the deficiency action. The most common defenses to this type of suit are that the lender:
The following are a few situations where you probably don’t need to hire an attorney after your car has been repossessed.
If you know you can't keep up with the payments, and you don’t want the car back, it's probably not necessary to hire an attorney—unless you’re eventually sued for a deficiency balance, which might not even happen. The lender could choose not to pursue a deficiency judgment, and some states place limits on deficiency balances after repossession. For example, deficiency judgments sometimes aren't allowed if:
If you want the car back and have sufficient money available to reinstate the loan or redeem the vehicle, you probably don’t need to hire an attorney.
Reinstating the loan. In some states and under some loan agreements, you may reinstate your loan by paying the past-due amount plus the costs of repossession and related expenses. If you reinstate the loan, you must make future payments on time and meet the other terms of your reinstated contract to avoid another repossession.
Redeeming the car. You can generally reclaim the car if you pay off the entire loan balance, including repossession costs, called “redeeming” the vehicle.
When your lender sells the repossessed car at an auction, you can attend and bid on the vehicle. Keep in mind that you could still be on the hook for any deficiency if you buy the car at the auction.
Again, you probably don't need to hire an attorney if you want to redeem the vehicle, reinstate the loan, or buy the car at the auction. But if you think your vehicle was unlawfully repossessed and the lender won't help you, you should consider hiring or at least consulting with a local attorney. An attorney can tell you if the lender's actions were against the law, as well as help you get your car back by raising any illegalities either directly to the lender or by filing a lawsuit in court.
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