If you’re skidding towards auto repossession, it pays to know your rights.

3 minute read

Watching your car get repossessed from your office parking lot while your coworkers gather to whisper at the window or your neighbors look on is probably one of the worst experiences you can imagine. Yet auto repossession happens all the time, especially during times of high unemployment and a troubled economy.

Some states allow the lender to repossess the vehicle as soon as you default on your loan – if you’re 30, 60 or 90 days late, for example – depending on the terms of your financing contract.

1. The lender probably won’t need a court order

When you signed the financing contract for your vehicle loan, you likely gave the creditor the right to repossess your car without taking you to court or providing any notice if you fall behind. Some states require that the lender send a notice of default and right to cure before it can repossess the auto.

However, most states don’t require providing any notice before repossessing the vehicle and can come onto your property or a public or private lot to repossess, according to the Federal Trade Commission (FTC).

Find out: What to Do When You’re Broke, Unemployed and in Debt

2. Hiding your car won’t stop repossession

Locking up your car in your or a friend’s garage for weeks may seem like the perfect anti-repo solution, but such deception will only delay the inevitable repossession. Once the lender figures out you’re hiding the vehicle, it can file with the court for a replevin, a judicial order for possession.

Instead of hiding, scrounge up as much money as possible by cutting expenses and contact your lender to see if you can avoid repossession by catching up on past-due payments.

3. Not having auto insurance can lead to repossession

If your financing agreement requires you to maintain adequate auto insurance and you fail to cover the vehicle, the lender may be able to repossess your car. Always read the vehicle financing agreement carefully and maintain the required insurance coverage.

4. Repo agents must obey the law

The guy who shows up to repossess your car can’t legally wrestle you to the ground, break into your closed garage or chase you down to repossess your vehicle. That’s because repossession agents aren’t allowed to commit a “breach of the peace.”

For example, a repo agent could commit a breach of the peace by using or making a threat of physical force or nabbing your car from a closed garage, says the FTC.

5. Repossession puts a dent in your credit

Auto repossession will show up on your credit report under “Current Manner of Payment” (MOP) and will negatively affect your credit score. In addition, the late payments that led to repossession will also hurt your score, since payment history comprises about 35% of your credit score.

Both repossession and late payments stay on your credit report for up to seven years. If your car gets repossessed, don’t give up on your credit. Make sure you make all other payments on time so you can rebuild your credit while you’re waiting for those negative marks to drop off your credit report.

6. You can get personal items back

Depending on state law, if your car gets repossessed along with your purse, phone or other personal items, you’ll probably have an opportunity to get your stuff back.

For example, in California, the lender or repossession agent is not required to let you retrieve personal items from the vehicle before repossessing it but must inventory “all personal effects” found in the repossessed vehicle and store them for a minimum of 60 days for you to claim. Florida law requires the repossession agent to allow the owner of the vehicle to remove all personal belongings from the car.

If you’re present during repossession, ask the agent if you can retrieve your personal items before your car is towed away.

Find out: What Happens if You Stop Making Car Payments

7. You may have a chance to buy your car back

While it’s unlikely that you can afford to buy back your car after repossession, some states require the creditor to inform you of the date, time and place of the potential sale or auction of your vehicle so you can have the chance to buy it back.

However, the lender may require you to pay the past due amount or full amount owed, in addition to storage, repossession, attorney and preparation-for-sale fees before you can buy back the vehicle.

8. You’ll probably still owe money

If your car was repossessed, you’re still on the hook for the amount you owe the lender, which may try to recoup as much as possible by selling the vehicle privately or at auction.

If the price paid by the new buyer doesn’t cover the balance due on the car loan – and it probably won’t –  you will still owe what’s known as the “deficiency balance.”

For example, let’s say you owe $20,000 on the car and the creditor sells it for $16,000 at auction. You’ll still owe the difference of $4,000 to the lender. And if you default on the debt or any judgment against you, that default may lower your credit score significantly.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC