Do I Still Owe After a Repo?

You might get your car back at auction.
i Jerod Harris/Getty Images Entertainment/Getty Images

The day you bought your car, you probably had the best intentions of making the monthly payments, but life happens, and circumstances change. If you stop making your car payments, expect the car to be repossessed. Don’t breathe a sigh of relief, though. You still need to pay the money back, only you won’t have your car. Try to avoid repossession if possible because a repo can be an expensive venture, and just wishing it will all go away is not going to happen.

The Process

After the bank repossesses your car, it will usually try to sell it to recoup its money. The bank does not have to get top dollar for the car, but it can’t take just any offer, either. It has to sell the car in a “commercially reasonable manner.” This means it needs to meet the standard sales price of the area. You still owe the bank the difference between what the vehicle sells for and what you owed on it at the time of repossession. This is called a deficiency balance. You also owe any back payments you did not make, fees to pay the collection agent (repo man), storage fees and attorney’s fees.

How to Pay

You might be required to pay the money back in one lump sum, or you might be able to work out a payment plan with your bank or credit union. If you make no attempt to pay back what you owe, your creditor will probably seek a judgment against you. This usually results in having your wages or bank accounts garnished or a lien placed on your house. Repossession damages your credit score, and having a judgment against you lowers it even more.

Voluntary Repossession

If you know that you cannot make your car payments anymore, you can give the car up in a voluntary repossession. You will still owe on the car if there is a difference between what the vehicle sells for at auction and what you owe. You save some money this way, however, because you won’t pay collection agent fees.

Breach of Peace

The ball is not completely in the court of the creditor. Repossession must follow state rules. For example, in some states a creditor might be required to pay you a penalty if the collection agent used or threatened force or took the car from your closed garage without your permission. If a breach of peace was committed, you might have a defense if you are sued by the creditor.

Redeem the Car

If you can gather enough cash, you might be allowed to buy back the car. This is called redeeming it. You would pay the full amount of what you owe plus fees. You could also bid on it at auction and pay the bank the deficiency balance plus fees. Some states have laws that make it possible for the creditor to reinstate your loan if you pay your past-due amount and the repossession fees.

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