What is a Car Repossession?

finance investing

Car repossession occurs when a person falls behind on their car payments and the creditor reclaims the car. The basic idea behind car repossession is that the car has been bought on a hire purchase or loan agreement. This means that the goods you have bought are not legally yours until payment for the goods has been settled in full. Once this has been achieved, you will be classed as the rightful owner of the goods.

If you fail to keep up the payments as stated in the agreement, then you can face repossession of the goods. If this happens, then a lender can take legal action against you for the money owed to him. Unless you have a grace period set out in the agreement, a creditor can take your car back if you are only a day late with payments.

Different states have different car repossession laws, but the creditor usually does not have to give any notice when taking back the car. There is no legal requirement for you to return the car, but the creditor may simply take it from the street or a parking lot. In a car repossession case, if you attempt to conceal your car with the aim of stopping the creditor from reclaiming it, this may be considered a legal offence.

With car repossession, the creditor may sell your car at an auction to regain some of his money. However, you will still be liable for the rest of the balance outstanding on your car. You may also be liable to pay the creditor’s expenses for the time and money involved in the car repossession.

Chapter 13 is a law that can prevent car repossession from happening. If your car has been repossessed but not sold by your creditor when the case is filed, the court may tell the creditor to return your car. With Chapter 13, interest charges can be reduced and monthly payments can often be lowered. In some cases, the balance due on the vehicle may be reduced to the car’s market value, even if it is less than the loan value.

Another benefit of filing for Chapter 13 when faced with car repossession is that the court may order you to pay for your car in a single monthly payment. This will consolidate all of your bills into one payment. This single payment can sometimes be lower than your previous car payment.

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New: Discuss this Article

Posted by: butterfli30
I bought a used car in March of 2008, 1996 Nissan Maxima. I think I got a bum deal. I cant afford the car and I want to turn it back in to the bank but I dont know what the ramifications would be, because I'm sure its not as easy as just turning it in and not looking back. Help !
Posted by: anon17970
I am considering letting my car be repossesed. I got a bad deal on a car I've had lots of trouble with in 2 years; and I can not afford to fix the car again. I'm really upside down in the loan, was from the start; and I can't even trade it or sell it for what I owe. I think letting them repossess it might be my only recourse. I know they can say I owe them whatever is left on the loan after they sell the car, and I know they can turn that into a collection agency; but can they garnish my wages for the balance owed?
Posted by: anon4986
I could not make payments on a car, my attorney told me to return the vehicle. I did, but am being forced to pay off the remainder 18,000.00. Is this legal how can i get out of this I am 65 years old and living on a fixed income
Posted by: mztazz
I filed chapter 7 approx 2 months ago. I continued making my car payments. The Finance company's lawyers sent the reaffirmation documents for me to sign. I don't have a lawyer to help with negotiations. However I would sign documents if finance company agrees to reduce the balance to the car's market value. Until the Finance comp responds I am covered by the bankruptcy against repossession. The Finance company can present a motion terminating Stay. But can the Finance Company repossessed my car if I am making the monthly payments??
Posted by: anon3320
I am in process of filing bankruptcy. Can they repo my truck?
Posted by: anon2653
my car was parked in my private driveway and they repossessed it, is this legal?

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