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Car Repossession Process

Shalu Bhatti
Missed your car payment(s) for the past few months? Are you worried that your car will soon be repossessed by authorities? Or, has that already happened? Read on to understand the entire process of car repossession, so that you are ready to handle the situation.
The repossession process starts when you fail to make due payments against the car loan. In this case, you are considered as a defaulter and therefore, the car is confiscated by the lender till the time you pay off the balance amount of the loan.

The Procedure

Usually, the debtor is informed about the repossession by sending a notice which states the amount to be paid, and the date when the car will be taken away. This intimates the debtor and gives him/her an opportunity to prevent the probable consequences.
The notice is sent weeks in advance, giving the debtor enough time to arrange for the money to be paid along with the late fees. The laws for this procedure vary from state to state. Therefore, it is best to check with your state attorney about your rights in the process. Here is how it generally works.


  • Once the notice has been sent to the debtor, and if the debtor fails to make the payment within the specified time period, then 'repo men' are sent to the debtor's home by the creditors, to repossess the car.
  • Repo men are nothing but the agents which act on behalf of the creditors to collect the car. These men can use any means to get the car back, unless, the means do not breach any law.
  • However, it is completely okay to use a duplicate key without the debtor's permission. Many states don't even send any prior notice and take the car from where it is parked.
  • If at all, the repo men or the creditors end up doing something that violates the rights or causes violence, then the debtor has the right to take legal action against the creditor, and the creditor is liable to pay the imposed penalty.


  • Once the car has been confiscated by the creditor, there is still hope for the debtor to take it back before it is auctioned. This is known as reinstatement.
  • The debtor is required to get in touch with the creditor and work towards payment of the due amounts along with the late fees. Many a time, even the charges for repossession are added to the total amount payable.
  • All these steps need to be taken during the period of reinstatement, which starts from the repossession until the car is sold off. If you fail to get in touch with the creditor during this period, you might receive a notice (depending upon your state laws) which would inform you that the creditor would be selling the car.
  • Not all states and all people qualify for reinstatement. For example, people who have been through the process of reinstatement once, would not be allowed to do so again. Also, if the debtor had hid the vehicle at the time of repossession, they lose the chance of availing the benefit of reinstatement.


  • Other than the method of reinstatement, another option that the debtor has, is redemption.
  • To avail the benefit of redemption, the debtor needs to make payment of the entire balance payable to the creditor, along with the repossession and storage charges that the creditor incurred during the entire process.

Selling the Car

  • If the debtor fails, then the creditor goes ahead with the process of selling. The sale can be either public or private. Usually, car dealers are involved in the car auction. Even people interested in buying such cars can participate.
  • The last option that you have to get your car back, is to participate in the auction and outbid others, provided you are able to arrange for the desired funds till then.
  • If the amount of sale is less than the amount required, then the debtor is liable to pay for the deficit amount, which includes the cost incurred during repossession, storing, and selling.
  • To prevent the deficit balance digging a big whole in your wallet, you can reinstate the car yourself and sell it further at a higher price.
  • Suppose the value of your car is USD 20,000. You can reinstate it from the creditor and sell it for USD 15,000. This way you will just have to worry about the balance of USD 5,000. Whereas, if your creditor sells it off for USD 12,000, then you will have to pay the remaining USD 8,000 along with the selling and repossession charges.
  • There are many states who don't have the provision of payment of the deficiency balance. Also, if the amount is less, then many creditors are kind enough to let it go. Another way of not paying deficiency balance is declaring personal bankruptcy.
The entire process can be a headache for both the debtor and creditor. Many a time, when the debtor realizes that he/she would be unable to make payments, they choose to go for the voluntary car repossession, which is nothing but voluntarily surrendering the car back to the creditor.
You will have to discuss with your creditor about why you are unable to make further payments and then surrender the car. Even your creditor doesn't want to go through the trouble of selling it, so he/she will try to work something out.
Whenever you have trouble making payments, you must get in touch with your finance company before it's too late. Also, try to take help of a qualified attorney, if need be.