If you are behind on your car payments, you may be concerned that your lender will repossess your vehicle. Getting to and from work may be difficult, if not impossible, without a vehicle. It can also damage your credit score. If you are facing repossession of your vehicle, you can take steps to protect yourself. Depending on the facts in your case, you may be able to stop your vehicle from being repossessed in California. 

• Understand California Repossession Law

California vehicle repossession laws are complex, but they give lenders wide discretion to repossess vehicles. Under California law, lenders can repossess a vehicle if they miss a single payment. The lender can repossess your vehicle without ever having to go to court. This process is called a non-judicial repossession or self-help repossession. While self-help repossession is permissible, it cannot be completed in breach of the peace. 

In other words, there are rigorous requirements for repossessing a vehicle through self-help. First, there must be a default or breach of the security agreement, such as a failure to make a payment by the due date. The lender cannot breach the peace when repossessing your vehicle. Examples of breaching the peace include the following:

• Repossessing the property over the consumer’s objection
• Using or threatening to use force
• Threatening arrest or other involvement by law enforcement
• Forcing a person to stop his or her vehicle
• Breaking through a closed-door locked barrier, such as the garage, or damaging the vehicle 

When the lender does not adhere to these requirements, you can pursue taking action against the lender to stop the repossession.

• Ask for a Compromise or Extension

If your vehicle has not been repossessed yet, you may be able to negotiate with the lender. In California, lenders can repossess vehicles after a missed payment. However, the decision is still up to them regarding whether they take action or not. If you just had a minor setback and missed one payment, you can ask for a compromise or extension from the lender. Repossessing someone’s vehicle is a hassle and expensive, so the lender may be willing to negotiate with you. You will need to have a good explanation. Once you have communicated with the lender, you should identify the options you can take to stop your car from being repossessed. One option is a deferment agreement. 

• Check if You Qualify for a Deferment Term

A deferment term is an agreement in which the borrower does not have to pay the lender for a certain time. Essentially, a deferment extends the deadline for your car payment. Deferments can last between several months up to two years. You can only qualify for a deferment term if you show economic hardship. Requesting a deferment can give you more time to gather the money you will need to pay the balance you owe. 

However, you should remember that the interest may still pile up during the deferment. In some cases, the amount you will owe could be significantly higher with a deferment. You will need to sign a contract with the lender for your deferment. The contract should include the deferment length and the penalty you may accrue if you cannot make the payments past the deferment period. Deferment will not affect your credit score. 

• Refinance the Loan With a Different Lender

Many vehicle owners may not realize that they can refinance their vehicle loan with a different lender in many cases. You will obtain a new loan from a different lender when you refinance a loan. You will still need to transfer the balance from your existing loan. By refinancing, you may be able to secure a better interest rate that is lower than your current rate. In that case, you will be able to reduce the interest on the car loan that will accrue. However, it will not reduce your balance from your previous loan.

• Understand Your Legal Rights After Repossession

After the repossession or surrender of your vehicle, you have two rights. First, you can try to reinstate your contract by paying all past due amounts, plus any applicable delinquency charges, repossession costs, and collection costs. Depending on the reason for the repossession, you may have to satisfy any liens or encumbrances on your vehicle or obtain auto insurance. Upon reinstatement, the car will be returned to you, and you will begin paying on the contract as if there was no default in payment or repossession.

You also have a right to redeem your vehicle by paying off the entire balance due on your account. You will also have to pay any applicable delinquency charges, repossession, and collection costs. You may be owed a credit for any unearned finance charge or canceled Insurance, depending on the terms of your purchase agreement. Once you complete the redemption, the lender must return the vehicle to you. 

You will own the vehicle free and clear of any lien. Reinstating the contract will typically cost less than redeeming your vehicle, so it is usually the more desirable option. Your lender cannot deny you the right of redemption, but there are some limited circumstances in which the lender can deny the right to reinstate the contract. If you have questions about your legal options, we recommend contacting an experienced attorney. 

• Consider Filing for Bankruptcy 

If none of these options are workable solutions, you may want to consider filing for bankruptcy. If you cannot pay other bills in addition to your car payment, filing for bankruptcy could give you the fresh start you need. When you file for bankruptcy, the court will issue an automatic stay making it illegal for creditors and collectors to keep pursuing debts from you. Your car lender will not be able to repossess your vehicle. In many cases, people can keep their vehicles throughout the bankruptcy process. If you are concerned about your vehicle’s repossession and want to learn more about your options, we recommend reaching out to a bankruptcy attorney.