Auto Repossession – What You Should Know
When you buy or lease a car, your creditor or lessor has important rights on the vehicle - until you pay for the car in full. The rights and responsibilities of each party in the transaction is detailed in your finance contract and state laws. If you do not pay your car note on time or if, you stop paying your car note, the creditor or lessor may have the right to repossess your car without giving you any warning or pursuing the matter in the court system.
When a creditor decides to repossess your car, they cannot “breach the peace”. This means that they cannot forcible remove you from the vehicle. They cannot enter your garage and take the vehicle, stop you on the street and seize the vehicle, pretend to be law enforcement or cause unnecessary commotion in the process of seizing the car. If your creditor breaks any of these rules, they may be required to pay damages.
Once your car has been repossessed, your creditor may sell the car at a public or private auction. Most states require your creditor to advice you of the date of the auction so that you can attend the auction and bid on the car, if you so please. In most states, the creditor cannot keep any private items that you had in the car – you will have to verify this in your particular state.
If you decide to attend the car auction to repurchase your vehicle, remember that the full price of the car, will now be the winning bid plus other expenses associated with the auction and repossession.
If you are not interested in repurchasing your car or if someone other than yourself purchases the car at the auction, the amount that they pay for the car may be considerable lower than the balance you had left on the car, when it was repossessed. The difference between the amount that you owed and the amount that the auction winner paid is called the deficiency. You are responsible for the deficiency and any other fees associated with the repossession. For example, if you owed $10,000 at the time of the repossession and the car was sold for $8,500, you will owe your creditor $1,500 plus other auto repossession fees. The creditor may decide to pursue legal action against you and sue you for the deficiency amount.
If your creditor decides to sue you for the deficiency, they will notify you of the court date hearing. At this point, if you feel that the repossession breached any laws (e.g. breach of peace, unlawful repossession, etc), this is your chance to offer your defense. You will need the services of an experienced attorney.
Tips on Avoiding Auto Repossession
Negotiate With Your Creditor. Contact your creditor immediately, if you think that you will be late with your car payment and see if, you can negotiate another payment date. In some cases, the creditor may allow you to pay a few days later.
Sell You Car. You can sell the car and pay off the creditor. This will prevent the creditor from entering a negative tradeline item on your creditor report. It also gives you the chance to obtain the fair market price for the car. Lastly, it saves you the hassle and embarrassment of the auto repossession and the unnecessary fees associated with the repossession.
Voluntary Repossession. Return the car to the creditor. Once again this will help you to avoid auto repossession and the associated fees. Note that the creditor may still enter negative information on your credit report and this may reduce your FICO score.