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Information about voluntary vehicle repossession

Information about voluntary vehicle repossession

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Daniel Cohen
UpdatedMay 22, 2024
Key Takeaways:
  • Avoid a car repossession whenever possible.
  • Understand the rights of the lender to collect on the money you still owe.
  • Review your options for resolving a deficiency balance debt.

Voluntary vehicle repossession: do you know how many points/percent your credit is affected if you have to go this route?

Do you know how many points/percent your credit is affected if you have to voluntarily give up your car? Each credit agency has different scoring gauges, so how is someone supposed to know the real impact? Would the final result be reflected in the FICO score? and if so, do you know how badly if would affect my credit?

Thank you for your question about voluntary car repossession and its effects on your credit score.

Voluntary Repossession Effects

With regard to credit, a voluntary repossession is as bad as a regular repo. It will hurt your score badly for the next several years. Although no one can accurately predict how many points your score will fall, due to the complex way credit scores are calculated, you should expect at least a 100-point drop in score.

Effects of a Repo

If repossession hasn't happened yet, you should avoid it at all cost. A repossession is one of the worst things that can show on your credit report. Once the vehicle is repossessed, the lender will sell it off in an auction. Not only will they come after you for the difference (called a "deficiency balance") but they will also add all costs for the repossession, towing, storage, auction, reconditioning, late fees, interest, lawyers and anything else they can think of.

This could amount to several thousand dollars and if you do not pay, they can take you to court, get a judgment and then attach bank accounts, garnish wages (if your state allows it) and file liens on any other property you may own such as land and homes. Interest can continue to accrue, even after a judgment has been obtained.

Quick tip

Struggling with a deficiency balance debt? Contact one of’s pre-screened debt providers for a free, no-hassle debt settlement quote.

All of this activity will show on your credit for seven years and make it difficult to get loans in the future without making large down payments, paying add-on fees, and high interest rates.

Deficiency Balance

Even if you surrender your vehicle to your lender voluntarily, the lender has the legal right to collect on any balance remaining on the debt after the car is sold at auction. This type of debt is referred to as a "deficiency balance." The creditor may even file a lawsuit against you to collect on the unpaid deficiency balance. You should therefore only proceed with a voluntary repossession if you truly cannot afford the loan, as you will likely still owe the lender a significant amount of money, even after you no longer have the use and benefit of the property.

A deficiency balance is an unsecured debt, which the law treats the same as credit card debt, a payday loan, or medical debt, amongst other consumer debts. To see your rights and options for resolving the deficiency balance, read "Collections Advice."

Readers often ask if there is a requirement that the original creditor provide an accounting of the repossession, including the cost of storage, auction, and so on, to determine the bottom-line number in the deficiency balance. The answer is, probably not. I am aware of no state law that requires creditors to provide an accounting to debtors. Similarly, I am not aware of any rules that explain what can or cannot be included in a deficiency balance. Storage, towing, cleaning, and auction fees are reasonable and would probably be allowed by a judge should the matter ever be litigated.

Reader also ask about charge-off and deficiency balances. The fact that a deficiency balance is charged off (sometimes called written-off) by a creditor does not mean the debt is no longer collectable.

For more information about credit, credit scoring, and credit reports, I encourage you to visit Credit Resources.

I hope this information helps you Find. Learn & Save.



Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in New Jersey credit card delinquency rate was 3%, and the median credit card debt was $430.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.



MMorgan, Feb, 2012
I have a question, my vehicle was repossessed two weeks ago and I paid the past due payment and all the fees and got my car back within a week. Is this still going to show up on my credit as a repossession even if my contract was reinstated?
BBill, Feb, 2012
Your question is best answered by your lender. Under federal law, lenders are required to report accurate information to the credit reporting agencies, but not all information about borrower behavior. Your lender may have a policy of not reporting repossessions that are followed by reinstatements and redemptions. I doubt that, however.
SSummer, Feb, 2012
Here's a question. I had a car and defaulted on the loan. I never received a letter or a call regarding repossession attempts on the vehicle. I continued to drive it for another year. When I was able to get another vehicle I called the bank and gave them the address to come get the car. Which they did in April 2009. I Did not move from the address until June 2009. It is my understanding that if a bank repossesses a care (Voluntary or not) they are required BY law to send you information regarding the vehicle. Such as an option to purchase the vehicle back if you pay the loan in full at the same time, or when and where they would be putting it up for auction etc? That never happened. I also never received any notice saying what they did with the car and a revised balance. Like what I owe on the vehicle after the auction or if they smashed it or what. In December 2010 I looked at my credit report and it is still showing an OPEN loan for the car. And they are still charging interest and have not modified anything showing it as a repossession. I called them and left a message with a desk lady asking for the person incharge of this loan to call me back about this. They never returned my call. 1 year later I put in a dispute on the report and the bank called me and left me a message asking what exactly it is I am disputing. I did not return their call. I ALSO have not been contacted by them again since. And I just checked my credit report again today and they are STILL showing it as an open loan and charging interest! I don't know the step that needs to be taken next. Or if I Should contact a lawyer. I want to get rid of the debt but I NEED to know the accurate amount to be paid which the bank has failed to supply. Any Suggestions for this?
BBill, Feb, 2012
I am not aware of the law you mentioned, and it may be local to your state. Open a negotiation with your lender and learn the balance of the loan. Consider a lump-sum settlement to resolve the debt. If the lender is unreasonable, or negotiation is not your forte, then consider mediation.
EEve, Feb, 2012
k, question.. lets say i own a truck and did a voluntary repossession on it. The adjuster came out and they decided that it wasnt worth the time and have said they are not coming to get it. I just filed bankruptcy and the loan qualifies as part of that. so basically, i need to know what i do with the vehicle. It is still in my yard but i am afraid to scrap it or put it on the road because i dont even know if legally i am allowed to register it. I am in canada if that helps. any info would be fantastic.
BBill, Feb, 2012 is based in the US, and we have various levels of understanding of US federal and state laws. Our understanding of Canadian law is limited, and any response we have to your question would be based on US law. Consult with a lawyer in your province who has experience in consumer law. My guess, note that word choice, is the answer to your question varies by province. Please return here to share what you learn.
JJoshua, Jan, 2012
If I paid off my repo in full, how long will that take to get off my credit report? Will I be able to get loans, if the credit report says paid in full under my repo?
BBill, Jan, 2012
Under the Fair Credit Reporting Act, most derogatories must be removed from a credit report 7½ years after the date of first delinquency. The date most consumer debts are paid is irrelevant to this rule. (See the link I just mentioned for the exceptions.) Your paying the debt does not remove the derogatory from your credit report.

Focus on improving your credit score so the harm caused by the repossession is outweighed by positive activities.