Understanding Car Repossession: More Options than You Might Think

Consumer Finance - May 7, 2024
An older man and woman reviewing a car repossession notice in their home.

Car repossession is a phrase that almost nobody wants to hear. After all, if you have your own car, you’d like to keep it for a long time! But sometimes, the bank or the repossession agency comes calling and you may have to give up your hard-earned vehicle. With today’s handy technologies, it’s even easier for cars to get repossessed; for example, GPS tracking in newer vehicles makes it simple for collectors to locate the cars they need to repossess. There are even starter interrupter devices that your lender can use to remotely deactivate your car’s ignition system, rendering you incapable of using your vehicle before they come take it away.

However, there is more to car repossession than first meets the eye. For example, did you know that voluntary car repossession exists? Whether you are facing the threat of vehicle repossession, or you are simply seeking to better understand the repossession process, we’ll explain the options that may be available to you.

Tow truck taking away red car being repossessed.How does car repossession work?

When you buy a car, it can make you feel on top of the world! But if you got a loan to make this purchase, it means that if you don’t make all your payments in a timely fashion, your lender can repossess the car.

Once your payment is in default, your lender can send a repossession agentusually a tow truckto collect your vehicle. Once repossessed, your financial institution will usually sell the car. It’s important to know your rights if this occurs.

Being behind on your car payment means that repossession could be in your near future. If you’re behind on your payment and your car gets taken away, this can have a major impact on your credit score for the next several years. A low credit score can affect your ability to get another car, rent or buy a home, and make many other important financial decisions. You want to keep your credit scoreand your car!in good standing.

What is the difference between involuntary and voluntary car repossession?

Whether you knew your car was in jeopardy or not, involuntary repossession is what occurs when you do not choose to give up your car by choice. Involuntary car repossession is what nearly everybody thinks of when they think of a car getting repossessed. The much-dreaded repossession agent appears and takes your vehicle away from you. Sometimes they come without warning, perhaps even at night so that you wake up the next day to find no car waiting in your driveway.

Voluntary car repossession has the same consequences: You will no longer have a car, and your credit score could be heavily affected. The lender can seek to sell the vehicle and pursue you for the deficiency balance. The big difference is that you choose to give up your car, instead of waiting for it to be taken from you. Voluntarily giving up your car may save you some money, since your financial institution won’t have to charge you fees for making them pay to have your vehicle repossessed.

You may also be able to pay what is owed to save the car or sell the car and pay off the loan with the money you make from this sale. Discuss with your bank or other financial institution to find out your options. You also have the right to speak with an attorney to go over your rights and options.

What are the consequences of car repossession?

Couple looking at a laptop to understand voluntary car repossession process.Your credit can be heavily damaged when your car gets repossessed. Late payments can reflect on your credit reports for seven years or so, meaning that anyone who looks at your credit report will see that you may not be trustworthy with payment plans. Your lender may choose to let a collections agency deal with your remaining debt. Collection accounts can also show on your credit report for up to seven yearseven if you have paid the debt by then. And there is always the threat of legal action: Your lender or a collections agency can take you to court for unpaid debts.

Car repossession can hit your finances as well. Besides needing to pay off the remaining car loan and any interest on the loan, you could also find yourself in debt for costs that your lender had to pay during the repossession process. The bank will probably auction off your car; if the car sells for less than the amount you owe on your loans, you are responsible for paying this deficiency balance.

Take the next step.

Almost nobody wants to find themselves involved in a car repossession. Even if you would prefer to voluntarily give up your car, it still is not a fun choice to have to make. It’s far simpler and more pleasant to be proactive and avoid having your car repossessed in the first place! Here are a few steps you can take:

1. Consider becoming a LegalShield Member!

LegalShield provider law firms are here to help you with the legal ins and outs of the car repossession process. Instead of paying a lawyer by the hour, you pay an affordable monthly subscription fee and have access to a provider law firm that will provide a variety of legal services without a huge legal bill. Using the plan just once can save you significant costs, and it’s as simple as signing up and contacting our team.

2. Check out this blog post for further information about car repossession and learn how you can try to avoid having your car repossessed.

3. Get answers to frequently asked questions to find out how a LegalShield plan could be the best option to help you through the car repossession process!


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