According to studies, car repossessions have almost doubled during the pandemic. Here’s what you can do after your vehicle is repossessed.
First let’s discuss what repossession is – it is when the lender takes back the property that was used as collateral for a loan. In the case of vehicles, most car lenders sell the vehicle in an attempt to recoup their money.
Repossessions can show up on your credit in many ways, first as late payments, then as court judgment in states where judgments are required, then as a collection account. They are allowed to stay on your credit for up to 7 years from the date of the first late payment.
So how do you repair your credit after a repossession?
The very first thing you should do is check your credit report for the amount owed. Since most lenders sell the vehicle – your amount due should be the remaining loan balance MINUS the proceeds from the car sale. If you have gap insurance, the amount owed should be the remaining loan balance minus the gap insurance.
Remember we dispute items that are inaccurate, outdated, and unverifiable.
If the amount due on your report is inaccurate, send a validation letter to the bureaus asking them to validate the amount owed. Which they typically will. Then send requests to the gap company and the lender for receipts and proof of the gap payment or sale of the vehicle.
Then take your validation from the bureaus, along with the receipts, and send it back to the bureaus and demand that they remove this inaccurate information.
You can even send your documentation to the CFPB (the Consumer Financial Protection Bureau) and file a complaint against the bureaus.
In some cases, you can receive money due to overpayments or fines.
Know your state statutes
In some states like Florida, the car lender cannot pursue you for payment if the amount owed is less than $2,000 (State Statute §516.31(3)).