What happens after your car is repossessed

In many states a lender can repossess a car once you are in default, without warning and without going to court, as long as it does so without breaching the peace. What that means is set by state law and courts, but it generally rules out threats or force, taking the car from a closed garage without permission, and pressing on after you object in person. If you are an active-duty servicemember and took the loan before your service began, the Servicemembers Civil Relief Act generally requires a court order first.

Your belongings

Things you left in the car are still yours. Contact the lender right away to arrange to collect them, and write down what was in the car and roughly what it is worth. If the lender or the repossession company demands a fee before giving your property back, talk to a lawyer: the CFPB has found that practice unfair in an enforcement action.

The notice before the sale

The lender must send you notice before it sells the car or keeps it to settle the debt. For a public auction, the notice gives the date, time and place, so you can attend and bid. For a private sale, it gives the date after which the car may be sold. Keep this notice; the dates on it are the deadlines that matter.

Getting the car back

Under the Uniform Commercial Code you can redeem the car before it is sold by paying everything owed on the loan, plus the reasonable costs of repossessing and storing it. Some states also let you reinstate the loan by catching up only the missed payments and costs, which is far cheaper. Your contract and your state's law say whether you have that option; ask the lender in writing.

After the sale: deficiency or surplus

The sale must be commercially reasonable. The lender applies what the car brings first to the costs of taking and selling it, then to your loan. If that leaves a balance, called a deficiency, you may still owe it, and the lender or a collector may sue for it. If the sale brings more than you owe, the extra, called a surplus, is yours. Ask for a written accounting of the sale, the costs and how the money was applied.

Your credit

A repossession can stay on your credit reports for up to seven years. If it was reported in error, or the deficiency balance is wrong, you can dispute it (see how to dispute a credit report error).