Debt strains anyone’s monthly income and deciding how to manage it takes a lot of consideration. When things get shaky, whether referring to employment or otherwise, balancing that debt may get even more stressful when collectors come to repossess any vehicles with a loan on them.
According to the Federal Trade Commission, most states allow lenders to repossess vehicles as soon as the borrower defaults on the loan. This is often from a lack of payment, but lease contracts may stipulate other situations that constitute a borrower in default.
How repossession happens
Once a borrower defaults on their loan, the lender may repossess the vehicle at any time without notice and even come onto the borrower’s property to take it. Many states detail limits such as restricting lenders from “breaching of peace” such as with threats or physical violence.
These days, many lease loans may integrate electronic devices designed to disable defaulted vehicles when the borrower fails to make payments.
How repossession hurts
The first example of how repossession hurts is how the borrower no longer has a vehicle. This affects their job commute, how they get groceries and more.
Car repossession impacts a borrower’s credit negatively and remains on his or her credit score for up to seven years. It happens to many people as, according to eTags, over 2 million vehicle repossessions happen each year in the U.S.
Further, lenders go on to either store or sell the repossessed vehicle and may even demand the borrower pay all related costs as a part of their contract or a lawsuit.
There is hope though. When it comes to vehicle repossession, there are ways to halt it. Bankruptcy provides the option of an automatic stay so that borrowers have time to reorganize their debt and get their feet back under them.