Repossession Overview

If you borrowed money to buy or lease your car or truck, the business or bank that loaned you the money is called the “lender.” You probably signed a contract about the loan with the lender. Most loan contracts for cars and trucks say that if the borrower “defaults” (misses payments) the lender can “repossess” (take back) the car or truck. Most vehicle loan contracts say you default even if you only miss one payment. Look at your loan contract to find out if this is the case for you.

Did you default? If so, the lender can take your car or truck back without going to court. The lender doesn’t have to tell you ahead of time that it’s going to take back your car or truck. When your lender takes back your car or truck it’s called “repossession.”

You should avoid repossession if you can. If your lender repossesses your vehicle, it will probably sell it for a very low price. If your lender sells your car for less than it’s worth, it will still try to make you pay the loan. You could lose your vehicle and still have to pay for it. Your lender will probably charge you a repossession fee.

Plus, missed payments and repossessions are reported on your credit report. This will hurt you when you want to apply for credit cards and other loans.

Avoiding repossession

Here are five ways to avoid repossession:

Get your payments up to date. Most people can’t do this right away.
Try to renegotiate your loan with the original lender or your bank or credit union. Usually the bank or credit union have better rates than lenders working with the dealer who sold you the car.
Talk to an attorney about filing a Chapter 13 bankruptcy. If you have steady income but can’t get caught up right away, you may be able to avoid repossession by filing a Chapter 13 bankruptcy and getting caught up on car payments over a three- to five-year-plan.
Keep your vehicle in a locked garage. Your lender can’t “breach the peace” to repossess a vehicle. What does “breach the peace” mean? Your lender can’t break into a locked garage to take back the vehicle.
Keep your vehicle in an unusual place where your lender can’t find it.

Hiding or locking up your vehicle can give you time to catch up on your payments. What if you don’t catch up and your lender can’t take back your car for a long time? The lender will probably go to court to ask a judge to order you to hand over your vehicle and to ask for a judgment for the total amount you still owe on the vehicle.

Voluntary repossession

Are you behind on your payments? Has your lender asked to “voluntarily repossess” your vehicle? Voluntary repossession is the same as regular repossession. Voluntary repossession means you give the lender your vehicle instead of the lender taking it.

The only advantage to voluntary repossession is your lender won’t charge you a repossession fee. You will probably still owe the lender money. You will still have the repossession on your credit report.

Is the lender saying you won’t owe it money? Is the lender saying the repossession won’t be on your credit report? Get these promises in writing before you give the lender your car or truck.

Debt collector rules

Do you want to know more about what the lender or debt collector can and can’t do to make you pay? Read more in the Debt Collection section of our website.

Find out more

You can learn more about vehicle repossession on the Federal Trade Commission’s website.

Where to get help

Do you have a low income? Are you a victim of abuse? Do you have a disability? Are you 60 years old or older? If your answer to any of these questions is “yes,” you may be able to get free legal help. Fill out our form and we will call you back. Your information will be sent to Legal Services Vermont, which screens requests for help for both Vermont Legal Aid and Legal Services Vermont. You can also call us at 1-800-889-2047.

If you don’t qualify for free legal help, you can find an attorney through the Vermont Bar Association’s Lawyer Referral Service.

If you have a complaint against a dealer or finance company, you can contact:

Vermont Attorney General’s Consumer Assistance Program
1-800-649-2424 or 1-802-656-3183
Email: AGO.CAP@vermont.gov