Car Repossession Process
We all know what we need to do as soon as we decide to get a brand new ride for ourselves! Go to a credit firm to get a car loan, right? That's the case with most of us, unless we have huge funds in our bank accounts, which is rarely the case! So we get the finance, we get the car, we have good rides, and then we make our monthly payments on time! If this is how it goes with you, then you really don't have to worry about anything. But have you ever thought what if you miss out on a payment? Or may be 2 or 3 consecutive payments? What would you do then? What would the loan company do then? The answer is car repossession!!! The repossession process starts when you fail to make due payments against the car loan. In this case, you are considered as a defaulter and therefore the car is repossessed by the lender in order to pay off the balance amount of the loan.
Procedure for Car Repossession
The process is difficult for both the lender and the borrower. The way you want to keep making payments on time for your car, the same way even the creditors want to receive the payment in full without having to go through the trouble of car repossession! You should avoid getting yourself into a situation like this in the first place itself, as it completely ruins your credit history, therefore making it difficult for you to get loans in the future! Usually the debtors are informed about the repossession by sending a notice period which states the amount to be paid and the date when the car will be repossessed. This informs the debtor and gives him/her an opportunity to prevent the car repossession from taking place. The notice is send weeks before the repossession, giving the debtor enough time to collect the funds to be paid along with the late fees. Another point to keep in mind is that the car repossession laws vary from state to state. Therefore, it is best to check with your state attorney about your rights in the car repossession process. Here is how it generally works!
Repossession
- Once the notice has been sent to the debtor and if the debtor fails to make the due payment within the specified time period, then 'repo men' are sent to the debtor's home by the creditors to repossess the car.
- Repo men are nothing but the agents which come on behalf of the creditors to collect the car. These men can use any means to get the car back, unless, the means do not breach the peace! This means that any activity which threatens the security of the creditor, cannot be used. However, it is completely legal to use a duplicate key without the debtor's permission. Many states don't even send the notice of repossession and take the car anywhere it is parked without the borrower's permission.
- If at all the repo men or the creditors end up doing something that violates the rights or breaches the peace, then the debtor has the right to take legal action against the creditor and the creditor is liable to pay the penalty!
- Once the car has been repossessed or confiscated by the creditor, there is still a hope for the debtor to take back the car before it is auctioned or sold off to another party! This is known as reinstatement!
- The debtor is required to get in touch with the creditor and work towards payment of the past amounts along with the late fees. Many a time, even the charges for repossession are added to the total amount payable, which is usually around $300.
- All these steps need to be done during the period of reinstatement which starts after the repossession until the car is sold off. If you fail to get in touch with the creditor in this period, then you might receive a notice (depending upon your state laws) which would inform you that the creditor would be selling the car.
- Not all states and all people qualify for reinstatement. For example, people who have been through the process of reinstatement once, would not be allowed to do so again. Even if the debtor had hid the vehicle at the time of repossession, then even they lose the chance of availing the benefit of reinstatement!
- Apart from the method of reinstatement, another choice that the debtor has to get the car back is redemption!
- To avail the benefit of redemption, you need to make payment of the entire balance that you owe to the creditor, along with the repossession and storage charges that the creditor incurred on the entire car repossession process!
- This method is better than the reinstatement method as you are clearing off each and every debt that you owe the creditor and taking the car back into your possession. However, you need to have a lot of funds to consider this option!
- If the debtor fails to redeem the car or make payments for reinstating the ownership of the car, then the creditor goes further with the process of selling. The sale can be either public or private. Since it is a car involved, usually car dealers are involved in the car auction. Even people interested in buying repossessed cars can be found.
- The last option that you have to get your car back is to participate in the auction or sale and outbid others, provided you have the desired funds.
- Once the car is sold off, the creditor uses the sale amount towards fulfillment of the amount due for payment. If the amount of sale is less than the amount required, then the debtor is liable to pay for the deficit amount, which is the balance amount left for payment, including the repossession, storing and selling charges!
- There is a way to have the minimum deficit balance is to reinstate the car yourself and sell it off at a higher price and use the price to make payments towards your debt. An example for the same would be, suppose the value of your car is $20,000. You can reinstate it from the creditor and sell it in a car auction for $15000. This way you will just have to worry about the balance of $5000. Whereas, if your creditor sells it off for $12000, then you will have to pay the remaining $8000 along with the selling and repossession charges!
- There are many states who don't have the provision of payment of the deficiency balance. Also if the amount is less, then many creditors are kind enough to let it go. Another way of not paying deficiency balance is declaring personal bankruptcy!
