How to recover from a car repossession in 5 steps
When your car is picked up, you might not be sure why it happened or how you’re going to get to work the next day. But you can recover by taking steps to meet your transportation needs and protect your credit from further damage.
Here are five steps you can take to recover from repossession:
1. Ask why your car was repossessed
If you fallen behind on car payments, you may know exactly why your car was taken over. Other times it’s not that obvious. In some states, failure to purchase insurance as stipulated in a loan or rental agreement can be considered a default and your car can be repoed because of it. Call your lender before jumping to conclusions so that you can clarify how you can sort things out.
2. Find out if you can get it back
Often times, a bank or repossession company will allow you to get your car back if you pay off the loan in full, along with any repossession fees, before it goes to auction. Sometimes you can reinstate the loan and make a new payment plan. Repossession cannot be removed from your credit report in these situations, but your new payments will usually be reflected if you make a deal with your lender (but not if you buy the car back at auction).
Before picking up your car, think about these questions:
If you got your car back, would you be able to pay for insurance, maintenance and gasoline? Neglecting major repairs or having an accident without being insured can put you in an even more difficult financial situation. And without gas, you still couldn’t get from A to B. If you can’t afford the expense, buying back your car might not be your most profitable alternative.
Do you have access to affordable public transportation or carpooling? Getting to work by bus or other means may be a better option than reinstating your loan or paying your balance and trade-in fees in full.
Do you intend to declare bankruptcy? If you are extremely late on all of your bills and have no way to change things, you may already be considering bankruptcy. Make your case before the bank or pension agency sells your car, and there’s a good chance you can keep your car and make a plan to catch up on payments. Talk to your bankruptcy lawyer find out if this would be possible, depending on the type of bankruptcy you are filing.
3. Know your rights
Even when your car is towed, you still have certain protections:
The lender or the repo agency can repossess the car but not the items inside. If you left your laptop in the car, for example, the lender can’t keep or sell it. In some states, the bank or pension agency may be required to give you a list of the items inside the car and how you can collect them. If not, you may need to ask. Typically, this does not apply to accessories that you may have installed in the car, such as new rims or an inflated audio system.
Your property must not be damaged in the process. If your car is locked in your garage, for example, a boarding agent cannot break your garage door to retrieve your car. If you believe your rights have been violated, consider contacting a consumer lawyer.
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4. If the car is sold, ask if you still owe money.
When a bank or pension agency repossesses your car and sells it at auction, you might think you run out of money. It’s not always the case.
Suppose a bank gave you a car loan for $ 10,000 and you still owed $ 9,000 when you defaulted. If the trade-in car sold at auction for $ 7,000, you still owe $ 2,000 on the car, plus trade-in fees in some cases. This is called a deficit balance.
Insufficient balances are common, especially when your auto loan was for a new car. Sometimes you can lose around 10% of a new car’s value just by driving it off the ground. Even so, the lender or the repossession company still has the responsibility to conduct the sale in a “commercially reasonable manner”. If the repo car is sold for a price well below fair market value, you may be able to challenge the high deficit in court.
Accounts in collections may stay on your credit report for seven years, so if you have the cash, it’s usually a good idea to pay off the rest to minimize damage to your credit.
5. Work on improving your credit
A typical repossession stays on your credit report for up to seven years, so a big part of restoring your credit afterwards is over. But you can also be proactive in restore your credit by paying your bills on time and working to pay off other debts. That way, by the time your negative history goes public, your credit score will be much higher than before and you will be in a better position.
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