What Happens After Your Car Is Repossessed?
After repossession, the lender must usually send you notice before selling the car, and you may be able to get it back by paying the full balance plus costs (redemption) or, in some states, by catching up missed payments (reinstatement). You can retrieve personal belongings. If the sale brings less than you owe, you may owe a deficiency balance. Repossessions stay on credit reports for about seven years.
Repossession happens fast, often without warning. What follows is governed mostly by your state's version of Article 9 of the Uniform Commercial Code and your loan contract.
How repossession works
After a default, a lender can take the car without going to court as long as it does so without a breach of the peace, such as using threats, breaking into a locked garage, or continuing over your objection in some states (UCC 9-609). Some states require notice and a chance to cure before repossession.
Your personal property
Belongings inside the car are not part of the collateral. Contact the lender or repossession company promptly to retrieve them; some states and contracts set deadlines.
Getting the car back
- Redemption: pay the full loan balance plus reasonable repossession and storage costs before the car is sold (UCC 9-623).
- Reinstatement: some states and contracts let you pay only the past-due amount plus fees to get the car back and resume payments.
- Bankruptcy: filing Chapter 13, and sometimes Chapter 7, can stop a sale, and in some cases recover the car.
Notice of sale
The lender generally must send you reasonable notice before selling the car, stating whether the sale will be public or private and how to find out the amount owed (UCC 9-611). The sale must be commercially reasonable.
Deficiency balance
If the sale price is less than the loan balance plus costs, the lender can usually seek the difference as a deficiency. If the lender did not follow notice or sale rules, you may have a defense or claim. If the sale brings more than you owe, you are entitled to the surplus.
Credit effects
Repossession and any unpaid deficiency usually remain on credit reports for about seven years from the original delinquency (FTC).
Voluntary surrender
Returning the car yourself can save repossession fees but does not eliminate a deficiency.
Options to consider
Contact the lender quickly to negotiate, check your state's reinstatement rights, and talk to a bankruptcy lawyer if you need the car for work. See also Chapter 7 vs. Chapter 13.
Sources
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This article is general legal information, not legal advice, and reading it does not create an attorney-client relationship. Laws differ by state and change over time; talk to a licensed attorney in your state about your situation.