- 1 Voluntary or involuntary repossession
- 2 Get The Facts Regarding an Automobile Repossession
- 3 Understanding Voluntary Repossession
Voluntary or involuntary repossession
While getting either a voluntary or involuntary on your credit report is bad. I will try to explain some of the differences that may or may not affect you later on when trying to make a purchase of anything in regards to credit.
Is when you decide to not give the car back to the bank, you effectively ignore the lien holders requests to return the car. You hide the car or whatever collateral it might be. You force the lien holder to pay extra for skip tracing work and simply do not give up the car under any circumstances until further legal action is threatened or the car is found and repossessed against your will. Most repossessions are involuntary in my opinion, I am not sure not about actual statistics between the two, but I can say that hundreds of times a repossession was supposed to be voluntary and it became evident it was a lie and the car was involuntary. People need their car to get to work, they just don’t want to give up a car, it is tough to get another one, especially after a repossession. I should rephrase that, maybe not to tough but unreasonable interest rates and terms that normally lead to another repossession.
An Involuntary repossession will go on your credit as an involuntary repo and in the future when another finance company or bank looks into your credit they will see that you hid the vehicle and refused to give it up. The credit rating will essentially be the same, but the actual lender may have a different idea, knowing that you are not the type to give back what you do not pay for.
A voluntary repossession is either you calling a bank and letting them know you lost your job, or for whatever reason you can no longer pay for the car. You advise them to come and pick it up, or they tell you they need to repossess it and you agree to a time and place for the repoman to pick it up. This is voluntary and sometimes you might be surprised that a bank may actually work with you by lowering payments or extending the loan, doing things to maybe help you keep the car. This will go on your credit report as a repossession still, but it will certainly look better when getting evaluated for another car purchase in the future. It will give you the same credit point reductions and take the full 7 years to go off the report.
As stated above so many times a person wants to sound nice to the bank representative and say they will give up the car but quickly have second thoughts and will not show up. other times certain banks might assume it is voluntary and write up the repossession as a voluntary. Why do banks do this?
A voluntary is usually much cheaper then a typical involuntary repossession, it is like a regular tow job. So a voluntary may only be $150 as opposed to the $350.00–500 fee a regular repossession will run. Be aware of your bank trying to skip out on paying the full repossession fee by saying it is voluntary.
Another reason some people do voluntary repossessions is in trade for certain things. Sometimes a bank will make a promise for something in return.
Get The Facts Regarding an Automobile Repossession
Last Updated: August 1, 2017
Buying a car is the second biggest purchase we make behind buying a house. But, if you are late with your car payments, your vehicle could be repossessed by your lender. Going through an auto repossession is not a fun experience and one that should not be taken lightly as it will cause major damage to your credit score.
When you finance or lease a car, truck, or some other type of vehicle, the loan is normally secured against the vehicle itself. This means that your creditor or lessor holds specific rights to your vehicle until you've completed all loan payments or fulfilled your leasing obligation; and, should you default on the loan, the lender has the right to repossess the vehicle. In fact, even one late payment may provide creditors the opportunity to legally repossess your car, so it is important to be aware of contents of your specific contract and state law governing repossession.
Can Your Car Be Repossessed by the Lender?
If you have defaulted on your contract in any way, your creditor or lessor may have the right to repossess your vehicle. In many states, they can do this legally with no advance warning, and no court action. They must, however, do this without "breaching the peace." It is worth emphasizing again the importance of reading your contract and understanding what constitutes default in your individual situation. The loan contract must disclose the lender's repossession policy and what your rights are if repossession occurs. If your state has specific laws for auto repossessions, they usually will be referenced in the contract as well.
What if You Can No Longer Pay on the Car?
Many of us are faced with temporary challenges such as medical bills or unemployment, and need to find an interim solution. Obviously, it is smarter to try to prevent a vehicle repossession than to dispute it afterward. Contact the creditor and attempt to negotiate a grace period or revised payment schedule; if successful, be sure to obtain any agreements in writing.
If the creditor or lessor refuses to allow any leniency and repossession is eminent, you may decide that voluntary repossession is an option for your situation. Giving the vehicle back voluntarily may reduce your creditors expenses for repossession fees; however, you will still be responsible for paying any deficiency on your credit or lease contract, and there is no guarantee that the late payments and/or repossession will not end up on your credit report.
A typical vehicle repossession might progress through the following steps:
- You are notified in writing by your creditor or lessor that your payment is late (not necessarily required, however; contingent on your specific contract).
- You may receive a second notice/warning and/or a telephone call warning of your overdue payment.
- A grace period may pass (length as stated in your contract).
- A second warning may be provided either by phone or mail.
- Your car is repossessed in one of several methods.
- You receive notice of repossession and some explanation of your rights and the process for exercising them.
- You decide whether to pay the exorbitant fees or allow the creditor to sell it at auction for perhaps a fraction of it's worth; possibly leaving you with a balance still due, or deficiency judgment.
If you default on your loan, the law in most states allows the creditor or lessor to repossess your car; however, some state laws place specific limitations on the ways a creditor or lessor can repossess and/or sell your vehicle to pay off your debt. Research your specific state laws; if any rules are violated, you may be entitled to damages from the creditor or lessor! For instance, some states require creditors or lessors to inform you in advance if they plan to enter your property to seize your car. If a breach of peace occurs (a public scene, harm to person or property, perhaps even removing your vehicle from an enclosed garage), you may be entitled to compensation.
Once your car has been repossessed, it will most likely be sold in a public or private auction to cover the debt partially or in full. State laws typically provide some requirement that the sale of the repossessed vehicle be conducted in a commercially reasonable manner. Generally, the expectation is that the sale price obtained is fair for the established market for the vehicle (but the expectation is on the low end), and the method of selling the car was conducted in a commercially reasonable manner according to standard custom for the appropriate market. Thus, contingent on your individual state law, failure to sell your vehicle in a commercially reasonable manner and get a fair and honest market price, may provide means for a claim or dispute against your creditor for damages.
Some state laws require that the creditor or lessor must inform you what will happen to your car; if it is to be sold at public or private auction for instance, inform you of the date of sale and allow you the right to participate and/or buy back the vehicle (inclusive of additional fees you may owe due to the repossession process). If the creditor or lessor does not inform you of this information, and your state law dictates this, you may be able to recover damages as well.
Personal property left in your vehicle is typically not considered the property of the creditor or lessor post-repossession; and in fact, they are typically required to ensure that others cannot damage or remove items left behind. Depending on your state laws, you may have a right to compensation for any missing articles of personal property resulting from the repo process. Personal property constitutes freestanding items that are left in the car which are not improvements or physical attachments to the car (like a built-in GPS or DVD player).
It's not over yet. Your car was repossessed while you were enjoying your popcorn with that cool guy or gal you just met, sold for pennies on the dollar and now you are in front of a judge being sued for the outstanding balance. How did this happen? Sometimes when your car is repossessed the original creditor sells the car for less than the amount remaining on your loan. When this happens they can come after you for the balance, called the deficiency. This Sample Letter is for the purpose of disputing collection activities on a deficiency from a motor vehicle repossession. It may be used AFTER 2 years from the date of the repo sale, providing there has been no filed claim for a judgment. It should not be used if you have been sued, or if the repossession is less than 2 years ago.
Depending on your individual state's law, in the event of a suit for a deficiency judgment, you should be notified of the date of the court hearing. It is during this process that you would provide and utilize any grounds for disputing the judgment; such as any failure to follow the protocols we have discussed earlier (again, each state is different so you will need to do your homework).
Understanding Voluntary Repossession
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If you are searching for information on voluntary repossession, then you absolutely NEED to continue reading. Voluntary repossession involves a creditor (that holds a title to a piece of your property) taking back the property from you. The term is used more often than not to refer to an automobile repossession though it can sometimes refer to voluntary house repossession. The reason behind repossession generally involves overwhelming lack of payment on debt.
In this type of repossession the debtor will voluntarily (of their own accord) give up a piece of property that is securing a loan. As mentioned above, automobile repossessions are most common, and when repossessed, go to the lender that financed the purchase originally. They most often occur when someone falls behind on their loan payments, is swamped with debt, or just plain old decides to surrender the property rather than have the creditor attempt to repossess the property involuntarily.
Though it is not nearly as common as automobile repossession, voluntary acceptance of repossession can take place with any type of secured loan. Work equipment, jewelry, and other reasonably expensive items that require loans are all apt to be repossessed in the case of non-payment.
How Does Voluntary Repossession Work?
If you are forced to voluntarily surrender a piece of property to the lender that originally financed its purchase, the first thing that you should do is contact them. It is of utmost importance to explain your financial circumstances. Highlight that you can no longer afford the monthly payments, won’t likely be able to in the near future, and that you would like to surrender the property.
Though the situation of repossession voluntarily is far from ideal for a creditor, they will most likely be okay with it as a worst case scenario. After you contact them, they should give you a location as to where you can turn over the property. They should then tell you (and if they don’t, ask) all of the details that you would need to know about the procedure.
If you attempt to voluntarily turn over a piece of property to a creditor, you should first expect them to resist your request. Most of the time, they would much prefer working with you to find a way for you to keep the loan and retain the property. The bright side of this is that simply talking things through with them might help you find a way to safely maintain the loan.
Voluntary Repossession vs. Standard Repossession
Though they both have the same (negative) effects on your credit score, voluntary repossessions and standard repossessions differ slightly. As you can probably guess from their names alone, a voluntary repossession is, well, voluntary while a standard repossession doesn’t have anything to do with volunteering.
If you have been struggling to repay a loan for some time and are falling far behind, then there is a good chance that your property will be repossessed, especially in the case of a vehicle. When it comes down to this point, many people choose to voluntarily repossess their vehicle rather than fight it out because the cost of the process is generally much less than with a standard repossession.
Avoid Voluntary Repossession!
A deficiency balance is another factor that you have to consider when you voluntarily repossess a vehicle. After the car is sold at an auction, the lender has the legal right to ask for the balance (the deficiency balance) if any is remaining after the vehicle’s sale.
A creditor can even file a lawsuit against you if you do not pay this deficiency balance. This is why you should only follow through with a voluntaryoption as a last resort – if you actually can’t afford the loan. In almost every case, you will be left owing the lender some money even after you part with your property.
Remember to only consider this type of repossessing an object as a last resort, if you truly cannot pay off the loans attached to it. Though it is a far from ideal solution to most financial problems, sometimes it is the only solution that there is. If this is the case with you, refer to the information above to make the best possible decision when repossessing your vehicle.
And, like always, know your rights and do your research. The more that you know going into a voluntary repossession, the better it can turn out for you.