At the end of 2017, United States residents took out an astounding $1.2 trillion in car loan debt, which is an increase of 9 percent from the year before. Many of these loans come with interest rates as high as 20 percent. A high interest rate can mean the difference between a monthly payment that meets the family budget and one that doesn't.
This is just one of the reasons 6 million Americans are more than 90 days late on their auto loans. If you get behind and your car is repossessed by the bank, there are a few things you can do to waive the associated fees.
Proving your car was illegally repossessed is one way to avoid repossession fees. Other options for reducing or waiving fees on legal repossessions include going the voluntary repossession route or filing for bankruptcy.
Know What Fees to Expect
Before you begin any negotiations to waive repossession fees, you'll need to know what fees to expect. In addition to the repossession fees charged by the bank, you may also be looking at towing charges and charges to have your vehicle impounded or stored until auction.
Go the Voluntary Repossession Route
Your best bet is to go the voluntary repossession route. Financial institutions look at consumers in a much better light when they acknowledge their inability to pay and are willing to turn in the vehicle. When you make arrangements to bring the car to the loan issuer's requested drop-off point, you'll automatically be eliminating any towing and impounding fees.
In exchange for the surrender of the car, you can also negotiate that any other fees be waived. Then, after the automobile is sold at auction, you'll only be responsible for paying back any difference on the actual loan amount. For example, if you owed $5,000 and the car was sold for $3,000, you'd still have to pay $2,000.
Prove Illegal Repossession
It may be possible to get out of paying any repossession fees if the law was not followed when the car was repossessed. The person seizing the car is not allowed to "breach the peace." This means that he cannot threaten you, cause you bodily harm or physically damage your property, such as cutting a lock to your garage when taking the vehicle. If this occurs, contact an attorney and get assistance in challenging the repossession in court.
File for Bankruptcy
Bankruptcy should only be used as a last resort, as it has a negative impact on a person's credit score. It is also important to file the motion before the car has been repossessed. This will give you what is called an "automatic stay," which means the loan issuers will not be able to follow through with the repossession.
Instead, you'll be given time to negotiate the loan terms with the financial institution. You may be able to come up with a new payment plan, agree on settlement of one lump sum or arrange for voluntary repossession in exchange for not paying any fees.
- Make sure your vehicle wasn’t mistakenly repossessed by checking with your lender. If your car or truck was towed away by accident, lenders are more willing to waive the fee right away.
- Filing for bankruptcy can stop the repossession process of your vehicle; however, it can also badly damage your credit and prevent you from receiving future loans.
- If you voluntarily give up your vehicle, car dealerships will sometimes waive fees associated with a repossession.
- Magnify Money: 5 Steps to Take When Your Car Is Repossessed
- Young, Marr & Associates Law Firm: Is Voluntary Repossession Bad For Your Credit?
- Legal Aid Society: Automobile Repossessions
- Sacramento County Public Law Library: Auto Repossession
- Quartz: American Car Buyers Are Borrowing Like Never Before — and Missing Plenty of Payments, Too
- Fair Debt Collection: Repossession