Auto Loan Charge Offs

Missing a payment on your car loan can increase the chance of your lender repossessing your car.  That normally happens when the lender notifies you about missed payment and you fail to respond or fail to pay.  Lenders repossess vehicles so that they can sell them and use the proceeds to pay your loan down.

When the proceeds are not enough to cover the balance you owe, the lender can file a lawsuit against you. A bankruptcy lawyer can advise you on what to do if your vehicle is about to be repossessed or when you can no longer make your car loan payments.

What Are Auto Repossessions?

AUTO LOAN CHARGE OFFSWhen a lender that lets you borrow money to buy a vehicle takes back the vehicle from you, it is called repossession.

This is because the car is the security for the loan.  So, when you default on the loan, your lender has the right to repossess the vehicle and sell it. The lender uses the proceeds from that sale to recoup some of the money you owe on the loan.

But if this is only the first step the lender can take before they sue you and win a money judgment.

How Auto Repossession Works

People who default on a car loan may lose their vehicle through repossession. The term “default” means failing to make payments on your car loan as you agreed on the loan contract. Just missing one payment is enough for the lender to repossess your vehicle.

The process of repossession depends on the state. But generally, lenders are required to not breach the peace when repossessing your vehicle. The law defines breaching the peace as ignoring the car owner’s objections to repossession or becoming confrontational or menacing when repossessing the car.

Oftentimes lenders contract third parties such as towing companies or repo companies to repossess your car. This means that it’s very easy for them to breach the peace if the owner of the vehicle is around when they are grabbing the car. This is why most repossession takes place at night, or when the car is parked at the office or shopping center parking lots.

Some states allow repo agents to hotwire the car, take it from an open garage, or even make a duplicate key. They cannot get into a closed garage or breach a locked fence.

Reclaim Your Car Through The Right To Redeem

After your car is repossessed, the lender has to wait a certain period of time before selling the car. During this time, you can “redeem the contract” by paying off the entire amount you owe on the car loan.  You also have to pay for the repossession and storage costs.

Once you do this, the lender will have to give the car back to you, but this time you will own the car outright.

What Is Right To Reinstate The Contract?

Debtors that are unable to pay the entire car loan may be able to “reinstate” the contract.  This involves making up the past due payments, penalties, interests, repossession costs, and storage costs.  After paying, you will get your car back.

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