5 Ways to Recover After Your Car Is Repossessed

1. Ask why your car was repossessed

If you fell behind on car payments, know exactly why your car was repossessed. In some states, not getting insurance stipulated in a loan or lease contract can count as a default, and your car can be repossessed because of it. Call your bank or lending company before jumping to conclusions so you can clarify how you can set things straight.

1. Find out if you can get it back

A bank or repossession company will let you get your car back if you pay back the loan in full, along with all the repossession costs, before it’s sold at auction. You can sometimes reinstate the loan and work out a new payment plan, too. The repossession may not be removed from your credit report in these situations, but your new payments will generally be reflected if you make a deal with your bank.

1. Know your rights

The lender or agency can repossess the car but not the items inside. If you left your world-class CD collection on the front seat, for instance, the lender can’t keep or sell it. In some states, the bank or repo agency may be required to give you a list of items inside the car and tell you how you can retrieve them. If that’s not the case, you may have to ask. Generally, this does not apply to accessories you may have installed in the car, such as new rims or a souped-up audio system.

1. If the car is sold, ask if you still owe money

When a bank or agency repossesses your car and sells it at auction, you might think that you don’t owe any more money on it. That’s not always the case. Say a bank gave you a $20,000 car loan and you still owed $8,000 on it when you defaulted. If the repossessed car sold at auction for $6500, you’d still owe $1500 on the car, plus repossession expenses, in some cases. This is called a deficiency balance.

1. Work on improving your credit

A repossession typically stays on your credit report for up to seven years, so a big part of restoring your credit afterward is just waiting. But you can also be proactive in restoring your credit by paying your bills on time and working on paying off other debt. This way, by the time your negative history comes off the record, your credit score will be much higher than before, and you’ll be in a better position.