What Happens to a Car in a Repossession?
If you’re behind on your car payments, it’s important to understand what happens to your car if it’s repossessed. This knowledge can help you know your rights and decide on your next steps.
As a Memphis bankruptcy lawyer, I’m here to guide you through this process and help you stop repossession for good.
What Is Car Repossession?
Car repossession happens when you stop making payments on your car loan and the lender takes back the car. This usually happens after you’ve missed several payments, but it can happen as soon as you miss one payment, depending on your loan agreement.
Assuming no major mistakes, the lender usually has the legal right to take the car back. Technically, the car is their property until you’ve paid off the loan.
But that doesn’t make it easy: repossession can be a traumatic experience that keeps you from getting to work, school, and medical appointments. It makes sense so many people turn to our Memphis lawyers to stop repossession.
How Does Repossession Work?
When your lender decides to repossess your car, they usually hire a repossession company to do the job. This company will come to where you live, work, or any other location where the car is parked. The repossession agent will tow the car away, often without any warning.
In Tennessee, they don’t have to notify you before repossessing your car, as long as they don’t break the peace—meaning they can’t use force or threats.
Often people will try to hide their car from repossession. While it might seem like a good temporary solution, deliberately concealing your car from repossession agents could be seen as a violation of your loan agreement and may lead to more serious legal consequences. Besides, lenders can always take legal action to locate and repossess the vehicle, and they can find your car in any public or easily accessible space.
You should keep the power in your own hands as much as possible. To do that, address the issue head-on by contacting your lender or speaking to a bankruptcy lawyer to explore legal ways to avoid repossession.
What Happens to My Car After Repossession?
Once your car is repossessed, it’s usually taken to a storage facility. You’ll likely receive a notice telling you where the car is and how much time you have to get it back. However, getting your car back isn’t as simple as just picking it up. Here are the typical steps that happen next:
Storage Fees:
First, the lender will charge you for the cost of towing and storing your car. These fees can add up quickly, especially if you wait too long to act.
Auction:
If you can’t pay what you owe, including the fees, the lender will sell the car at an auction. The money from the sale goes toward paying off your loan.
Deficiency Balance:
If the auction doesn’t cover the full amount of your loan, you’re still responsible for the difference. This is called a “deficiency balance.” For example, if you owe $10,000 on your car loan and the car sells for $7,000 at auction, you still owe $3,000.
Can I Get My Car Back After It’s Repossessed?
All these fees can add up and make it difficult to get your car back. But yes, you can sometimes recover your car after it’s been repossessed. Even better, you can stop repossession before it happens with the help of a lawyer. Here are a few options:
Redeem Your Car:
This means paying the entire amount you owe on the loan, plus any fees, all at once. This can be a big financial burden, but it’s an option if you have the money. Of course, for most people, if you have the money to pay this much at once, you probably aren’t facing repossession in the first place.
Reinstate Your Loan:
In some cases, you can catch up on the missed payments, including fees, and continue with your loan.
However, not all lenders offer this option. And sometimes they’ll negotiate at rates impossible for you to pay.
File for Bankruptcy:
If you know you’re behind on your car payments, filing for bankruptcy offers a legal and enforceable way to stop the repossession for good.
When you file for bankruptcy, an “automatic stay” goes into effect. This means all collection activities, including repossession, have to stop immediately.
What’s more, after filing, creditors have to go through your attorney. They can’t even contact you about the debt moving forward.
Just remember, you will have a much better chance of saving your car if you contact a lawyer well before they actually repossess your car.
For a lot of people, including the thousands of people we’ve helped over decades in the Memphis area, bankruptcy means true relief from repossession and a fresh start. You can keep your car, end the creditor harassment, and build a better plan to move forward without debt.
How Our Bankruptcy Lawyers Can Help
If your car has been repossessed or you’re at risk of repossession, our Memphis bankruptcy lawyers help you stop repossession and protect your assets.
But it’s much easier to stop a repossession in advance vs. retrieving your car if it’s repossessed. So don’t wait until it’s too late—if you’re struggling to make your car payments, reach out to us today. Let’s discuss how we can help you keep your car and get back on track. The conversation is free.