If you have obtained an auto loan to buy a car, missing monthly payments can damage your credit score and can result in car repossession. The car acts as collateral for the loan, giving your creditor the right to seize your vehicle should you become delinquent. Repossession can occur as soon as you default on repayment. It can occur without a warning if you’ve defaulted on your car loan.
Car repossession usually happens after a Chapter 7 bankruptcy discharge because the lien on the car is not eliminated by bankruptcy. If you default on your monthly car payment after bankruptcy, your lender has the right to repossess your vehicle. Laws and regulations on repossessions vary from state to state. A qualified Phoenix bankruptcy attorney can help you abide by the state law that governs the bankruptcy and repossession process.
The article will help you understand how car repossession works and how to recover from it. Here are the steps on how to get your car back after repossession:
- Identify the reason for repossession
- Find out the options on how to get your car back
- Know your rights in repossession
- Know what happens after selling your car
- Work on rebuilding your credit score
Identify the reason for repossession
The most common reason for car repossession is late or missed loan payments. Once you default on a loan, your creditor may be allowed to repossess your vehicle at any time, even without notice.
Furthermore, not having the proper insurance (or letting your insurance coverage lapse) may be considered a default in some states and also lead to the repossession process.
In most cases, vehicle repossession is involuntary. It is usually initiated by the creditor rather than the debtor. However, if you believe that you are at risk of repossession, you can consider voluntary repossession by surrendering the car voluntarily. In this situation, you may still have to pay off any outstanding balance due after your vehicle is sold.
Find out the options on how to get your car back
There are various ways on how to get your car back after repossession. It is advisable to consult a credible Phoenix bankruptcy lawyer to help you know and decide which option will work best for you. Here are some of the options available to you for getting your car back after repo:
- Redeem the Vehicle – The term “redeem” means to buy back a car or vehicle. If you have the means to pay back the entire loan balance, including mortgage arrears and repossession costs, you can redeem your car after repossession.
- Reinstate the Auto Loan – If you don’t have sufficient funds to redeem the vehicle, you might be able to get your car back through reinstatement. Reinstating auto loans requires you to keep them current by making up all of the past due payments, (including applicable fees and late charges), in one lump sum.
- Buy It Back at the Auction – If your creditor sells your car at auction, you can try to bid and buy it back. If your car will be sold at a public auction, state law may require your creditor to tell you the time and place of the sale so that you can attend and participate in the bidding. If the vehicle will be sold privately, you may have a right to know the date of the sale. However, even if you’ve successfully bought the car back, you’ll still be held liable for any resulting deficiency balance.
- File for Bankruptcy – If you have declared bankruptcy prior to the sale of your car, the automatic sty will prohibit the lender from selling it without obtaining court approval. Depending on the type of bankruptcy you file, it can give you more time to gather the necessary funds to get your car back or allow you to cure your arrears through a bankruptcy filing. You need to file before the banks or repo agencies sell your car so you can have a good chance to keep it and work out a plan to catch up on missed payments.
Know your rights
To know your rights in repossession, the first thing that you need to do is to review the terms of the loan contract. You need to make sure that you and your creditor have not violated any provisions stated on the loan agreement.
In addition, your property shouldn’t be damaged in the repossession process. Lenders can repossess a car that is parked on private property. Should there be a breach of the peace in seizing your vehicle, your creditor may be obligated to compensate you if any harm or unlawful activity is done to you or your property. A breach of peace also may give you a lawful defense if your creditor sues you to collect a ‘deficiency judgment’. This refers to the difference between what you owe on the contract (plus repossession and sale expenses) and what your creditor gets from selling your car.
Regardless of the method used to dispose of a repossessed car, a creditor may not keep or sell any personal items found inside. In some states, your creditor must send you a list of your belongings that were found in your car and how you can reclaim them.
Know what happens after selling your car
Car repossession doesn’t automatically wipe out all your unpaid debts at once. If your creditor sells your car, the sales proceeds go toward your loan balance. Your creditor must make an effort to get a fair market value out of the car and has to be sold for a “commercially reasonable” price.
In most cases, the car sells for less than you owe, so your loan is still not fully paid off. The amount you owe after the resale of your vehicle is called a deficiency balance. It usually happens when your auto loan was for a new vehicle. Your creditor may be able to sue you in order to collect the deficiency. On the other hand, if the vehicle has a higher price at sale than the amount you owed, your creditor must refund the extra money.
Work on rebuilding your credit score
A repossession stays on your credit report for seven years. It will start from the date of the first missed monthly payment that led to the repossession. Rebuilding your credit scores after a repossession may take time, but you can start right away with one step at a time. You can start by bringing past-due accounts current. If you are behind on any other accounts, catching up on payments until your account has no past-due amounts is a good first step toward repairing your credit scores. You need to repay any outstanding debts, such as collections or charge-offs. Making payments on time going forward will help you achieve a good credit score. If you have other credit accounts, see to it that all payments on those accounts will be made on time. Your recent payment history matters the most.
The Role of a Bankruptcy Attorney
Car repossession can be a complicated and stressful process, but you don’t have to go through it alone. For legal help, do not hesitate to schedule a consultation with our experienced Phoenix bankruptcy lawyers at Phoenix Fresh Start Bankruptcy Attorneys. Our lawyers can help you understand the car repossession process and provide you with options specific to your situation. We will protect your legal rights, negotiate with your creditor, identify your options while considering bankruptcy, and help you take back your car after repossession.