Any time you take out a loan for an automobile, that vehicle still legally belongs to the creditor until you submit your final payment. The 2017 Manheim Used Car Market Report revealed that U.S. citizens had $1.1 trillion in outstanding car loans with 3.7 million of those loans falling in the seriously delinquent category. If you are several months behind on your car payment, the creditor has the right to repossess your car, and he doesn't have to give you any notice before he shows up to collect the vehicle. Even though you no longer have the car, you are still responsible to pay the rest of the repossession debt.
Determine How Much You Owe
The creditor will make every effort to sell the repossessed vehicle either privately or through an auction. The sale amount is deducted from the amount you owed on the loan. For example, if you had a balance of $10,000 at the time of repossession and the car sold for $2,500 at an auction, you would still owe the creditor $7,500. Of course, the creditor is permitted to add any repossession or auction fees incurred to that total. If the fees totaled $100, you would then owe $7,600.
Make Payment Arrangements
Chances are you won't be able to pay the repossession debt in full, so it's best to contact the creditor and make payment arrangements. When you come to agreeable terms that work with your budget, you'll be asked to sign a contract that outlines those terms. The lender may also require that you set up automatic payments with your bank so that the lender has a better guarantee that you'll make your payments on time.
Make a Settlement Offer
Another option is to make a settlement offer to clear the debt. This is a great option if you have a large sum of money, but not the full amount needed to completely pay off the loan. Perhaps you got a tax refund or an inheritance. Contact the creditor and inquire about settling the debt for a fraction of what you owe. The lender may be willing to accept as little as 40 to 60 percent of the balanced owed. That means if you owed $7,600 and the creditor agreed to take 50 percent, you'd only have to pay $3,800.
Make Bankruptcy Your Last Resort
Individuals who can't afford to make payment arrangements or negotiate a settlement offer can file for bankruptcy. A repossession affects your credit negatively for a period of seven years, just like a bankruptcy does. This option should be used only as a last resort and is best taken advantage of when you have other debts you need help with as well.