Avoiding Car Repossession

When you take out a mortgage loan on a house, the house is collateral for the loan.  The same applies to taking out a car loan.  With cars and houses constantly hanging in the balance, it is no wonder that adult life never ceases to be overwhelmingly stressful.  Ownership is the pinnacle of adult life.  So what happens if you are not perfect at paying the bills?  If it is the mortgage loan you have fallen behind on, foreclosure is what you may face.  Failure to make car payments can lead to repossession.

How Does Car Repossession Work?

Repossession occurs in the absence of another big “R” word: responsibility.  Not only are you responsible for making car payments, but you must also insure your car.  Failure to meet these responsibilities will lead to your car loan being in default.  You signed a car loan agreement with a creditor and until that loan is paid off, that creditor, or lender, has a valid security interest in your car.  When a car loan is in default, the car, as the collateral, can be repossessed.  No advance notice is required, either, and it does not necessarily have to be done through a court.  Furthermore, once the car is repossessed, the lender still has options.  If the lender sells the car, but still fails to cover the balance of what you owe, this is called a deficiency balance, and you can be sued for it.  Take heed, however, protocol does exist for car repossession.  There are questions you can ask in your defense:

Did the lender enter your garage without permission, threaten violence or damage your property?
Did the lender wait too long to sue on the balance owed for the debt? Then, it is possible that the statute of limitations has run out and suing you is no longer an option. 

How to Avoid Car Repossession

Having your car repossessed sure sounds like a predicament.  Would you rather avoid it all together?  Carefully consider each of these alternatives:

Communicate

Without communication, you are just a debt to be collected. There is no guarantee as to what type of a person your lender or creditor will be.  Still, it cannot hurt to open a line of communication.  How else do you find out what your options are, if any?  Your lender may agree to reduce your monthly payments or the interest rate.  All you have to do is ask.

Pay In Advance

Stay ahead of your payments.  Bounced checks or late payments have less impact if you have provided a cushion.

Keep Documents Ready

Are you the type of person who keeps your receipts?  You will have to do better than that when buying a car.  Keep all related documents.  Here is a list:

1. The original retail installment sales contract;
2. All documents provided by the dealership and lender;
3. All correspondence from the dealership and lender;
4. All documents relating to car repairs;
5. All inspection documents; and
6. All payments on the car loan.

How to Get Your Car Back After Repossession 

Once your car is repossessed, you will receive a written notice of redemption.  This first notice lets you know that the lender or repossession company has your car and intends to sell it.  You must receive it at least ten days in advance of the sale so that you may have time to recover any personal property or redeem the car by paying the loan in full, along with the repossession costs. If you are unable to redeem the car, the notice should include details regarding the sale.  You are allowed to bid and may end up paying less than you would if you attempted to redeem it.  Once the lender sells the car, any remaining debt must still be settled.

Being a consumer is never as scary as when you buy a home or car, especially for the first time. With so much at stake, it is only common sense to seek the advice of a consumer law attorney.  If you fear that you might be facing car repossession or feel that your car was wrongfully repossessed, contact the Law Office of H. Benjamin Sharlin LLC for a free consultation.