Failing to make your auto payments or defaulting in on your loan can result in your auto being possibly repossessed by your lender. If you want to learn about how auto repossession works, and better yet how to avoid becoming part of that statistic, and what options you might have should your auto become repossessed, then read on.
If you ever wondered why the lender is allowed to repo your car, that is directly related to the financing you received on your auto. Anytime you decide to finance, you are giving the lender a secured interest in the auto in question. While every states auto repossession laws differ, the lender in general has a secured and vested interest in the auto, meaning the lender can repossess the car at any time and without notice should you default on the loan. There is a variety of things that can cause you to default on the loan, for example you could be on time and never have missed a car payment, yet still default on your auto loan. How can you default on your loan if you have never missed a payment? If you have lapsed on car insurance you can then be in default on your loan as loans require the car be insured. Lenders can and do repossess cars where the owner has let the insurance lapse.
In general your lender can send a repo mean or repo team to take the vehicle at any time you are in default. They can even take your vehicle from a your wok place, and retrieve the auto from your property. They can do this without any prior notice or warning, in fact most lenders will give no forewarning of a pending repossession, as this can make the repossession process harder for the lender, if the debtor decides to make things difficult. Repo men cannot break the peace while repossessing your auto, which in general means they cannot create for example enter your closed garage, nor use threats or violence to repo the auto. If a lender breaches the peace at any point in the repossession process, you could be entitled to damages, and you may use it as a defense in any deficiency lawsuit the lender might bring.
After your auto has been repossessed your lender has two main options. The first and most unlikely is that they can keep the vehicle. The second and most common option is that the lender will sell the auto to recoup on their losses. They can sell the auto for far less than what is owed, then sue you via a deficiency lawsuit for the remainder. Your lender however in most states must inform you of when and where this sale is to take place, if you ask. Your lender must also follow legal and standard sales practices, failure on your lenders part to do this can result in a defense against any deficiency suit against you, if the sale was not performed in a generally commercially reasonable manner.
Your lender does not have to simply rely on and hope repossession and the resale of your repossessed car to pay off the loan balance. Any remaining balance on the loan after a repossession and resale of the auto can result in a deficiency balance. Your lender can sue you for the deficiency balance in most states. There are a few defenses for a deficiency suit, including if the lender repossessed your car while breaching the peace, did not sell your car in a commercially feasible way or if the lender waited to long to sue and the statue of limitations has passed. The statue of limitations for a deficiency suit will vary by state.
You do have a few options to try and get your auto back:
Redeem the car
This is where you pay the full balance of the loan back plus repo cars. Very few people ever manage to pull this off, since they had financial problems to begin with that led to the repossession in the first place.
Buy it at auction
If the lender auctions it, you can bid and potentially win your auto back. You are still liable however legally for any deficiency, and a deficiency suit can still be brought.
Reinstate the Loan
This is an option available in a limited number of states. To pull this off you must pay back every payment you are in arrears for, and the cost of repossession. Once this is done you can have the loan reinstated. Of course you will have to keep up with future loan payments, or this process could well happen again.
You must file before the auto is sold, then a stay of sale is placed, which may give you time to obtain the funds needed to buy back your auto. The lender however can obtain court permission to sell it anyway. Much will depend on what chapter you file, some chapters can address the amount you are in arrears for, and some chapters like 13 can restructure the debt.