Repossession / Making Partial Payments

Can My Car Be Repossessed if I Make Partial Payments?

Written by Ben Tejes
Updated Nov 13th, 2023
The information provided in this article does not, and is not intended to, constitute legal or financial advice; instead, all information, content, and materials available in this article are for general informational purposes only. 

A common myth is that a creditor cannot repossess your vehicle if you make partial payments. Technically, partial payments are a breach of contract and could result in repossession.

Will the Lender Repo My Car for Partial Payments?

If you have made all of your car payments on time, a lender might overlook a partial payment and offer some grace period for you to catch up on the payment. However, ignoring that you did not make a full payment and failing to work something out with the lender could result in the repo company taking your vehicle.

Each lender is different. Some lenders are willing to work with customers more than other lenders. Therefore, if you are a valued customer (you make all your payments on time and in full), your lender might work with you to resolve a short-term financial crisis that prevents you from making a full payment. However, you must contact the lender and work out an agreement to prevent repossession.

Your Lender Has the Legal Right to Repo Your Car for Non-Payment

BEWARE! Your lender is not legally required to work with you, even if you have made 50 payments of a 60-month agreement on time and in full. You are bound by the terms of the loan agreement you signed when you financed the vehicle. It requires you to pay our payments on a specific day of the month. The contract specifies the payment amount.

A partial payment is not a full payment. Therefore, your lender has the right to repossess the vehicle for non-payment.

Furthermore, a partial payment does not count as a full payment. Therefore, your lender can begin the repossession process the day after your payment is due, even if you made a partial payment on the due date.

Also, it is a myth that a car lender must wait for a specific number of missed payments before repossessing a car. That is not true. A lender can repossess your vehicle if you are one payment behind. Most lenders try to work with their customers. They write letters or call them to arrange to catch up on the car payments. However, never assume your lender will not repo your car if you make a partial payment or miss one payment.

What Happens During a Repossession?

Repossession is the legal process of seizing a secured asset to satisfy a legal debt. When you default on your loan, your lender has the right to sell your vehicle to pay off the loan. Each state has laws governing vehicle repossessions. Many states allow lenders to repo vehicles “peacefully” without a court order when the loan contract contains the borrower's acknowledgment that the lender can seize the vehicle for non-payment.

“Peacefully” generally means no one tells the repo company they cannot remove the vehicle from their property. That is why many repos occur at night when the owners are asleep or when the owners are at work or away from the vehicle. Some owners try hiding their vehicle or putting it in a locked garage at home to prevent a repo company from taking it. A repo company cannot break into your home to obtain a vehicle.

A lender can also obtain a court order for repossession if the person conceals the vehicle or prevents the repo company from taking the car. With a court order, the repo company can take the car even if the owner tells them they do not want the vehicle taken. They could have the sheriff assist in ensuring that the owner does not try to stop them from retrieving the vehicle.

Caution: You Can Be Sued After Your Car Is Repossessed

An auto deficiency is what you owe to a creditor after your repossessed vehicle was sold at an auction and the amount is then applied to your owed amount. In some situations, the lawsuit can be over $5,000 or more as the vehicle may only get a fraction of what you pay for the vehicle, especially if your car is a lemon.

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How Does a Repossession Work if I Pay Partial Payments for My Car Loan?

Once the lender has the vehicle, it is sold at an auction. The proceeds are applied to the outstanding balance of the loan. You should be given credit for all payments and partial payments you made on the loan. If funds remain after the loan amount and costs are paid (very rare), the funds should be returned to the person.

In most cases, there is not enough money from the auction to pay the car loan in full. In that case, the lender might sue you for the remaining amount due. If the judge finds that you owe the money, the court issues a deficiency judgment or personal judgment against you for that amount.

Depending on your state laws, the lender could ask for a wage garnishment order to collect the deficiency judgment by garnishing your wages. In addition, if you have assets or income that is not exempt, the lender could ask the court to seize those assets to pay the deficiency judgment.

How Does Filing Bankruptcy Stop Repossession?

You have a few options if you cannot afford to catch up with your car payments. You could sell the car and pay off the loan if the vehicle is worth more than the loan payoff. If the car is worth less than you owe, you are responsible for paying the loan in full, or the lender could sue you and obtain a personal judgment.

You can also choose voluntary repossession. You arrange to return the vehicle to the lender voluntarily. However, the lender could still sue you for a deficiency judgment if the lender does not receive full payment for the loan when they sell the vehicle at auction.

Therefore, if you are facing foreclosure, you might want to talk with a bankruptcy lawyer about your bankruptcy options.

Filing bankruptcy stops foreclosure actions immediately. The lender cannot repossess your vehicle without court approval.

How Does Chapter 7 Help with Repossessions

If you file Chapter 7, you must arrange to pay the vehicle loan in full or work out a new installment agreement with the lender. If not, the lender can ask the court to allow it to move forward with the repossession. The lender can also wait until the Chapter 7 case closes to resume repossession actions.

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How Does Chapter 13 Help with Repossessions

However, if you file Chapter 13 and want to keep your vehicle, you can include the car loan in your Chapter 13 plan. Depending on the specific terms of the loan and the age of the loan, you might be able to restructure your car loan in the Chapter 13 plan. Some debtors can reduce their monthly car payments, interest rate, and the secured amount they owe for the vehicle.

The best way to learn whether a Chapter 13 bankruptcy case can help you is to talk with a Chapter 13 bankruptcy attorney. Ascend can help you locate a bankruptcy lawyer who offers free consultations near you.

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Call Now for a Free Debt Assessment to Discuss Solutions to Your Debt Problem

At Ascend, we help people find a way out of their debt problems. Each situation is different, so we offer information on all debt-relief options.

Call us at (833) 272-3631 or contact us online to speak with a representative. Our compassionate, knowledgeable staff members can help you take the first step in discovering a way out of the debt holding you back and weighing you down.