If you fail to make timely payments for your vehicle the creditor has the right to repossess the car. This can generally be done without taking you to court or providing you with prior notification.
Auto repossessions can be done by the creditor as soon as you legally default on your loan (what constitutes a default is generally outlined in your on contract). State laws define how the creditor can legally repossess your car which generally includes not disturbing the peace, using force or threatening violence.
Creditors generally have the legal right to keep the car or resell it in a “commercially reasonable manner,” but they should notify you of their intention. If the car is sold at public auction you can generally attend and attempt to buy the car. Failure by the creditor to get the full amount for loan may allow the creditor to sue you for the deficiency of the loan balance. Aggressively negotiating a settlement for the deficiency judgment is generally better than getting sued, and often the debtor may be willing to take less than the remaining balance.
Voluntary Repossession to Creditors
Do not avoid creditor calls if you are late with debt payments. The creditor does not want to repossess your car, and they may be willing to negotiate new payment terms with you. If you absolutely cannot make your car payments you may want to consider a voluntary repossession which will save the creditor time and money.
Car repossession and Bankruptcy
Filing bankruptcy may stop repossession, but whether or not you will get to keep the car will depend on your state’s bankruptcy exemption laws, whether you agree to reaffirm the debt and whether you file Chapter 7 or Chapter 13 bankruptcy. Talk to a bankruptcy lawyer to discuss your options and what bankruptcy may be best for you.
Regardless of whether your car is repossessed or you file bankruptcy each action will remain on your credit report for many years and will lower your credit score.