Can I stop repossession if I default on a car loan?

Borrowers can attempt to stop their cars from being repossessed if they default on a vehicle loan.

Recent car loan news stories have discussed the grueling trend of repossessions amid high unemployment, however they rarely shed light on how to halt repossession proceedings. Borrowers shouldn’t feel ashamed over falling behind on payments and facing repossession. Proactively trying to stop repossessions can save borrowers from losing their vehicle.

The first thing a borrower should do is to speak to their car loan lender. Lenders are far more likely to work out a deal or payment plan with a borrower that shows a genuine interest in repaying their debt. At the very least, this will buy borrowers time to scramble together enough money for a late payment.

One underhanded tactic is for a borrower to lock their vehicle up in a garage since a repossession agent cannot legally enter a home or private property for repossession. Unfortunately, this means that the car in question cannot be used to commute to jobs, interviews, social engagements, or campuses. A borrower facing repossession who continues to drive may find their vehicle gone once it is unattended. This maneuver also negates a borrower’s ability to negotiate, as lenders are unlikely to help a borrower if that borrower tries to avoid repossession through openly deceptive means.

Depending on a borrower’s personal financial situation, filing for bankruptcy may be an option. Under the automatic stay provision in some bankruptcy laws, creditors, such as car loan lenders, are prohibited from pursuing the collection of debts. Automatic stay is intended to allow a bankruptcy trustee to have time to review a defaulting borrower’s assets prior to the distribution of payments to creditors. Car loan lenders can still file a motion for relief from automatic stay. If the court agrees to remove the automatic stay protection from the car, then the lender can legally repossess the vehicle.

Filing for bankruptcy does damage borrowers’ credit scores, which makes it very difficult to borrow money in the future. Therefore, bankruptcy should not be undertaken hastily or without careful consideration of alternatives.