What creditors can and can’t do in case of car repossession

If you have borrowed money to buy a car, you won’t be the actual owner of the vehicle. You might have the car, drive it, or can use it to earn money. But until you pay off the entire car loan with interest, the lender will be the owner

The lender can take it away through car repossession if you stop making car loan payments.

Before you face the situation and a debt collector repossesses the car, it is better to know the facts, how the process works, and what you can do to solve the issue.

What is car repossession?

In simple words, car repossession denotes the process through which a bank or lender takes a vehicle away from the borrower due to the non-payment of the loan.

It might also happen that the lender may repossess the car without any warning. Lenders might send their representative (driver) to initiate the car repossession process. To get custody, they may take it away by towing. Sometimes, lenders may even lock your car until you clear unpaid dues. It normally happens when they are going to repossess the car.

A borrower may receive emails, phone calls, or postal emails from lenders notifying them that he/she is behind on payments. Lenders should inform the borrower of every legal step they are going to take. But lenders might not tell you exactly when they’re coming for the vehicle.

When is repossession allowed legally?

When you borrow money to buy a car, you have to sign an agreement on specific terms. You may agree to make fixed monthly payments on time and opt-out of sufficient insurance coverage for the vehicle. If you don’t fulfill any of these terms, the bank or the lender can legally initiate the car repossession process.

As a result, you’ll lose the car, and your credit score will also get a hit. You may have to pay additional fees. A repossession will be listed on your credit report for 7 years, whether or not you get the car back. So do the needful before a debt collector repossesses the car.

What are your rights as a borrower?

Your lender might have the right to repossess your car, but as a borrower, you also have a few rights:

a. Private property

Lenders can repossess your car if it is parked on your private property. But as per state law, it is generally restricted to “breach the peace” during repossession.

For example, car repossession agents cannot damage your property to get the vehicle. They can’t forcefully trespass into your place by destroying locks. They can’t even use physical force when taking your car. If they do, you can take legal action.

b. Sales price

If your car is repossessed and auctioned, the lender should sell it for a “commercially reasonable” value. The lender should try to get a fair market value out of the deal. The sales proceeds will be used to pay off your debt, so the sale price should be also fair and reasonable.

Can a debt collector repossess the car?

You may handle the creditor by direct communication and manage to retain the car. But what would happen if you got a call from a debt collector whom you can’t pay? Can a debt collector repossess the car?

The debt collector will keep sending official mails and call you every day until you pay the car loan you owe. You have borrowed a good amount of money from them and didn’t pay it back. So, legally the debt collector will try to collect that debt. Even if your financial situation has changed and you are in no position to pay off your obligation, that doesn’t mean that you don’t have the debt burden at all. It still exists.

So you might be thinking, can a debt collector repossess your car? The simple and short answer to your question is no. In most cases, the collector cannot repossess or take the car.

But, there’s a catch! If money or a loan is taken to buy the car, or if the debt is the result of a title loan, where the car was put up as security for the loan, yes!!! The debt collector can go for your car.

What you can do about it

a. You can have the collector stop contacting you regarding the loan. As per the Fair Debt Collection Practices Act, you can request the collector to stop contacting you regarding this debt. After getting a written letter from you, the collector must cease all communication with you, except:

      • (i) Notifying you that the collection efforts are being stopped.
      • (ii) Notifying you of a specific action being considered or taken against you, such as suing you in court.

b. You can inform the collector in writing that you are filing for bankruptcy. This will stop all contacts.


You may stop answering the collector’s call. You could also stop opening mail from the debt collector, but it is not recommended at all. You must know what your debt collector is informing you regarding the loan.

If the collector files a lawsuit against you, make sure you attend the court and provide the requested documents to the court. If you don’t, the court will give its judgment against you. You may not have any assets to liquidate or an income to serve garnishment at present, but someday, you might. So you should do everything to avoid a judgment against you if you can.

Good luck.