Repossession Fees Explained: What You’ll Owe and How to Avoid Them

Repossession fees are costs creditors charge to take your car. Towing, storage, and auction fees add up fast. When you fall behind on your car loan and your vehicle gets repossessed, you pay these fees. You need to understand what repossession fees mean for your finances.

How Much Does Repossession Cost?

Repossession can cost you hundreds or even thousands of dollars. These costs go beyond missed loan payments. When a lender repossesses your car, you pay the fees they spent to take and store it. You also pay for selling costs.

Common repossession expenses include towing fees, storage fees, and auction costs. You might face legal or administrative charges too. These fees add up quickly and can overwhelm your budget.

Repossession fees vary by location and lender practices. Some states protect borrowers better than others. Your state laws determine what lenders can charge you.

You must pay these fees to get your car back. Even if you don’t reclaim it, you might still owe money after the sale. A deficiency balance happens when sale proceeds don’t cover your loan. Lenders can pursue collection activity or sue you for this balance.

The sections below explain typical repossession costs and how lenders calculate them. You’ll also learn your options when you can’t afford to pay.

What Fees Are Involved With Repossession?

Repossession includes multiple fees that add to your debt burden. Direct repossession costs include:

• Towing fees to haul your vehicle

• Storage costs while your car sits in a lot

• Public auction costs to sell your vehicle

• County or city administrative fees

• Court costs and attorney fees if legal action is needed

You owe these fees on top of existing car loan costs such as:

• The remaining principal balance

• Unpaid interest on missed payments

• Late fees specified in your contract

A deficiency balance creates additional financial problems after repossession. Your car gets sold at auction for less than you owe. The difference becomes your responsibility. Lenders frequently sue borrowers to collect deficiency balances.

If you face a lawsuit and can’t afford legal help, our partner Solo can help you draft an answer. They’ve helped over 280,000 people respond to debt lawsuits with a money-back guarantee.

Can You Avoid Repossession Fees?

You avoid repossession fees by preventing the repossession itself. Once your car is taken, you’ll pay towing and storage costs. You pay these fees even if you never get your car back.

Contact your lender immediately if you’re struggling with payments. Many lenders offer new payment arrangements to avoid repossession costs. They save money by keeping you in the loan.

Selling your car yourself brings in more money than a public auction. You can use the proceeds to pay off your loan. A private sale helps you avoid fees and protects your credit score. You could also consider voluntarily surrendering your vehicle to the lender.

Filing for bankruptcy stops repossession and can eliminate related debt. Chapter 7 or Chapter 13 bankruptcy may halt a repossession in progress. Bankruptcy can wipe out any remaining balance if your car was already taken.

Using Bankruptcy To Deal With Repossession and Repo Fees

Bankruptcy offers powerful protection if your car faces repossession. Both Chapter 7 and Chapter 13 can help, but they work differently.

Both chapters trigger an automatic stay when you file. The automatic stay is a court order that stops most collection efforts. Your lender must immediately stop trying to take your car.

Your outcome depends on which bankruptcy type you file. Your position in the repossession process also matters. Each chapter offers different benefits for car loans.

Chapter 7 Bankruptcy and Repossession

Chapter 7 bankruptcy is faster and more affordable for most people. You can stop a repossession before it happens. Chapter 7 may eliminate fees and remaining loan balances after your car is sold.

Chapter 7 has important limitations you should understand:

• You usually can’t get your car back if it was repossessed before filing

• You must sign a reaffirmation agreement to keep your car

• Reaffirming means you remain responsible for the full amount, including fees

• Chapter 7 doesn’t reduce your interest rate or loan balance

Be honest about whether you can afford the payments after bankruptcy. Keeping a car you can’t afford prevents you from getting a true fresh start. Walking away from an unaffordable car loan gives you better long-term financial health.

Chapter 13 Bankruptcy and Repossession

Chapter 13 bankruptcy requires a 3 to 5 year repayment plan. You catch up on car payments through a court-approved plan. The plan restructures your debt into manageable payments.

Chapter 13 offers significant advantages for car loans:

• You may recover your car shortly after filing, even if already repossessed

• You can lower your interest rate on the loan

• You might reduce the total loan balance if your car is worth less than you owe

• Chapter 13 helps when you rolled negative equity into your current loan

Chapter 13 is more complex than Chapter 7 bankruptcy. Most people need help from a bankruptcy attorney to navigate the process. If you have steady income and struggle with car payments, speak with a bankruptcy attorney for free to explore your options. Chapter 13 can be a powerful tool to avoid repossession and reduce debt.

Key Points About Repossession Fees

The repossession process is expensive and damages your credit score. A repossession stays on your credit report for seven years. You can avoid high repossession fees by negotiating with your lender early.

Bankruptcy offers protection from repossession and related debt. Chapter 7 eliminates deficiency balances and repo fees after your car is sold. Chapter 13 helps you keep your car through an affordable repayment plan.

Acting quickly gives you more options to protect your finances. Contact your lender when you first struggle with payments. Early communication leads to better outcomes than waiting for repossession.