You rely on your car to get you places. When your mobility is jeopardized, you may be unable to get to work, to drive your kids to school, or to run regular errands. If your car is repossessed, it’s a difficulty that quickly spreads into other areas of your life.
Vehicle repossession can happen when you fail to make payments on a car that you’ve leased. Since finding yourself in danger of auto repossession requires swift and informed action, we spoke with several consumer advocacy lawyers to find out how to deal with auto repossession, what rights you have if it happens to you, and how to prevent a repossession before it's too late.
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How Auto Repossession Works
Your creditor or lessor has the right to repossess your car if you don’t make the payments you agreed to in your leasing agreement. Furthermore, Attorney John-Paul LaPré cautions that financial responsibility is not absolved even after your vehicle is taken: “Debtors often believe that when the car went away, so did the loan. This is not so.”
After repossession, the lender typically auctions off the vehicle if you don’t have adequate funds to cover the balance that you owe on the car. You're held liable for the difference between the sales price at the auction and your balance. This amount is called a deficiency.
The debtor will send written notice of the deficiency amount, which, along with the charges of auction payment and legal fees, may be much higher than what you owed on your original balance. LaPré notes that these letters usually “threaten lawsuits if the deficiency is not paid.”
What to Do if Your Car Is Repossessed
- Bankruptcy lawyer Steven Striffler notes that you have the right to “redeem the vehicle for the outstanding loan balance plus repossession costs before the lender may sell the vehicle.” Paying off the car is the best course of action if you have the funds.
- If you can’t pay off your balance, call your lender to see if you can negotiate a “workout,” an arrangement between you and your creditor.
- If a workout is unsuccessful, contact a bankruptcy lawyer. If you act quickly, you may be able to file for Chapter 13 bankruptcy. Striffler states that depending on the circumstances, this action “may allow the borrower to retain or regain possession of the vehicle and possibly modify the terms of their loan.”
Be Aware of Your Rights
Your creditor has the right to repossess your vehicle if you don’t make timely payments, but you also have legal rights in the process of repossession:
- LaPré states “a collector or repossession company cannot use threats, coercion, or other oppressive acts when recovering a vehicle.”
- The collector also cannot enter your private property, even if that’s where the car is located, without your consent.
- You have the right to any personal property that was in the car when it was seized, Striffler notes.
If you can take action to prevent your vehicle from being repossessed, you’ll avoid serious legal and financial headaches. Before committing to leasing a car, make sure that you can make the payments on time, each and every month.
If you’re late on a payment, LaPré advises that you review the promissory note you signed when you first got the car. Find out what it means to default on your lease, and “don’t let it get out of hand,” LaPré says. “Make a late payment ASAP, and be certain to include all late fees and other valid charges.”
Contacting your lender to negotiate a workout when you’re in default to is better than getting in touch after the fact. “Don’t just sit there waiting for the repo man,” LaPré explains, “Get in touch with the lender. Often they will negotiate something that may be much better than repossession and lawsuits.” For instance, it may be possible to reinstate or refinance the loan, or to surrender the car. Whatever you do, LaPré emphasizes, ’“Don’t do nothing!”