If your car is repossessed, you might be able to get it back by redeeming the car from the lender (paying the full amount you owe) or reinstating the car loan (getting current on payments). Below you can learn about redemption and reinstatement after vehicle repossession, the difference between the two, and whether those options will be available to you.
If you get behind on your car loan, it is likely that your lender will cut its losses by repossessing the vehicle under the terms of its contract with you, selling it, and applying the sales proceeds to the outstanding balance on your loan. (To learn more about how repossession works, see Car Repossessions and Auto Loan Charge Offs.) If the proceeds from the sale are not enough to cover the balance on your loan plus the lender’s costs of the repossession and sale, you’ll owe the car lender the remaining amount, called a deficiency. (Learn about deficiency after car repossession.)
Once the car is repossessed, however, you may be able to get the vehicle back from the lender through reinstatement of the loan or by redeeming the car from the lender.
There may be a number of reasons why you want to get your car, truck, van, or other motor vehicle back after the repossession, including:
Regardless of your motive for getting your car back, there are two methods you may be able to use to make that happen: redemption or reinstatement. Whether you can redeem the vehicle or reinstate the loan will depend on:
Keep in mind, however, that the time period for redeeming and reinstating is short. Under the laws of most states, after the vehicle is repossessed, the lender is only required to keep it for 10 to 15 days before the car is sold. Therefore, it is vital that you act quickly. Consider talking to an attorney or doing some research if you want to be sure of your rights, but contact the lender as soon as possible after repossession to preserve your right to redeem the car or reinstate the loan.
When you redeem your vehicle from the lender, you essentially buy back the car for what you owed on it. Generally, you can exercise your right to redeem the car until the lender sells or otherwise disposes of it.
Every state grants a borrower some form of redemption right, however, those laws may differ as to:
Exercising your right to redeem the vehicle may be expensive. In addition to the outstanding balance, the cost to redeem will include the lender’s reasonable repossession expenses, towing charges, storage fees, cleaning and repair expenses, attorney’s fees, and other costs like late fees that accumulated during the loan but remain unpaid. These fees alone could amount to hundreds of dollars.
The terms of the redemption may be negotiable, though. The lender may be willing to take less than the full amount owed or discount the repossession fees in order to reduce losses it might incur if it sells the car for less than its value.
Instead of redeeming the car for the outstanding balance plus the lender’s reasonable expenses, you might be able to regain possession of the car by reinstating the loan. To reinstate, the lender will typically require that you bring all the payments current, pay any outstanding fees under the contract, like late payment fees, and reimburse the lender for the costs of repossession.
Once you have reinstated the loan, you will still be required to make the remaining payments on time and keep adequate insurance coverage.
In some states, the law requires that a lender allow you to reinstate the loan. Even if reinstatement is not provided for by law, however, your lender may have included reinstatement in the terms of its financing agreement with you or may have a policy that allows a borrower to reinstate.
Like redemption, lenders may be willing to negotiate the terms of reinstatement, including how much of the outstanding balance or repossession costs you will have to pay to get your car back, or the lender may be willing to change the terms of the remaining payment schedule.
If you do not have the resources to redeem the vehicle or reinstate the loan, bankruptcy may be another option. With Chapter 13 bankruptcy, you could propose a plan to repay the car lender over time or to redeem the car for less than what you owe on it. (Learn more in Using Chapter 13 Bankruptcy to Get Your Car Back After Repossession.)