Car Repossession: It Can Happen To You

: Chris Lee Law Firm

  Filed under: Loans

Car RepossessionMany people who lease a car may not know that they are in jeopardy of losing the vehicle if they default on the payment.  Leasing a car does not get you out of certain hazards simply because you do not have a formal loan on the car. A car lease is treated similar to a financed car loan, which could mean your car is repossessed for non-payment.

Rent vs. Own

A car loan means you are buying the vehicle over time with the eventual goal of owning the car, which means that the loan is a secured debt. Secured debts allow the creditor to seize and liquidate the property for purposes of satisfying the debt owed. Leasing a car means that you are simply renting the car with no intention of owning the vehicle at the end of the lease term. Although the contract is quite different, a leased vehicle is still viewed as a secured debt.

What makes a car lease more difficult is that you will never have any equity in the car, meaning none of your payments are going towards satisfying the total debt owed. This means that if the car is repossessed, you will have little recourse to get it back or stop the repossession. Further, you are more likely to be required to repay the full amount of the lease contract, rather than the difference in the amount from what was owed and how much the car was sold for at auction.

Bankruptcy is one way to stop the repossession process, but may not always be able to save a leased car from the hands of creditors. Since the leased car debt has no equity and all of the ownership rights belong to the lease company, the debtor must act fast to save the car. Even then there is no guarantee that filing for bankruptcy can keep the car from repossession, unless the full amount of defaulted payments is made quickly to the lease holder.

 

 


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