Understanding the Rising Risk of Vehicle Repossession: What You Need to Know

The Consumer Financial Protection Bureau (CFPB) recently highlighted a troubling trend: more vehicles are eligible for repossession now than before the pandemic. With the cost of living rising, interest rates climbing, and pandemic-era protections disappearing, many Americans are struggling to keep up with car loan payments. If you’re concerned about your car being repossessed or facing financial hardship, it’s critical to understand the situation and your options.

What the CFPB Report Found

According to the CFPB’s findings, lenders today are faster to initiate repossession processes compared to the pre-pandemic period. Several factors contribute to this shift:

1. Easier Loan Approvals Before the Pandemic: During the pandemic, auto lenders approved loans with less stringent credit requirements, leading to a surge in vehicle purchases. Unfortunately, many borrowers now find themselves overextended as financial conditions tighten.
2. Rising Auto Loan Balances: The cost of vehicles has soared in recent years, pushing monthly payments to record highs. For many borrowers, even a small financial setback can mean falling behind on payments.
3. Increased Interest Rates: Federal interest rate hikes have made new loans more expensive and adjustable-rate loans harder to manage, leaving borrowers with fewer options for refinancing or restructuring existing loans.
4. Stricter Lender Policies: Lenders, keen to recover losses from rising defaults, are now quicker to repossess vehicles.

The combination of these factors has led to a marked increase in repossessions, affecting families across the nation.

What Vehicle Repossession Means for You

Repossession occurs when a lender takes back your vehicle due to missed loan payments. In most states, lenders can repossess your vehicle without notice if you’re in default, as long as they follow state laws and the terms of your loan agreement.

Repossession not only means losing access to your vehicle but can also damage your credit score and leave you owing money if the sale of the repossessed car doesn’t cover your remaining loan balance. This is known as a “deficiency balance.”

Signs You May Be at Risk of Repossession

If you’re struggling to keep up with your car payments, you may be at risk. Here are some warning signs:

• Missed or Late Payments: Falling behind on payments, even by a month, can put you in default.
• Overextension of Debt: If a large portion of your income goes toward debts, you may be unable to absorb unexpected expenses.
• Declining Credit Score: A drop in your credit score can indicate financial distress, making it harder to refinance your loan or negotiate with lenders.
• Communication from Your Lender: Receiving late payment notices or calls about missed payments is a clear signal that action may be imminent.

What You Can Do to Protect Yourself

If you’re concerned about repossession, there are steps you can take to protect yourself:

1. Communicate With Your Lender
   Don’t wait for repossession to happen. Contact your lender as soon as you realize you may miss a payment. Many lenders offer hardship programs or payment deferrals to help borrowers get back on track.
2. Explore Refinancing Options
   If your credit score hasn’t dropped significantly, refinancing your auto loan for a lower monthly payment may be a viable option.
3. Know Your State Laws
   Every state has different laws regarding repossession. Understanding your rights can help you navigate the process and avoid unfair treatment by lenders.
4. Consider Filing for Bankruptcy
   Filing for bankruptcy can temporarily halt repossession efforts and give you the time you need to restructure your debts. Chapter 7 bankruptcy may allow you to discharge certain debts, while Chapter 13 bankruptcy can help you develop a repayment plan.
5. Seek Legal Assistance
   If you’re facing repossession, consulting an attorney who specializes in consumer protection or bankruptcy can be invaluable. They can help you understand your options and advocate on your behalf.

How Van Horn Law Group Can Help

At Van Horn Law Group, we understand how overwhelming financial challenges can be, especially when your vehicle is at risk of repossession. Our experienced attorneys specialize in helping individuals navigate bankruptcy and debt relief options, protecting your rights, and finding solutions tailored to your situation.

Here’s how we can assist:

• Stopping Repossession: Filing for bankruptcy can temporarily halt repossession efforts, giving you time to develop a strategy.
• Debt Restructuring: We can help you restructure your debts under Chapter 13 bankruptcy, allowing you to keep your vehicle while catching up on missed payments.
• Negotiating With Lenders: Our team can work with your lender to explore alternatives to repossession, such as loan modifications or payment deferrals.

Conclusion

The rise in vehicle repossessions is a sobering reminder of the financial challenges many Americans face today. If you’re struggling to keep up with your car payments, know that you’re not alone—and help is available.

At Van Horn Law Group, we’re committed to helping individuals and families navigate financial hardship with compassion and expertise. Whether you need guidance on bankruptcy, debt relief, or negotiating with lenders, we’re here to support you every step of the way.

Don’t wait until it’s too late. Contact Van Horn Law Group today to schedule a free consultation and explore your options for protecting your vehicle and your financial future.