How to Settle an Old Car Repossession Debt

When a repossessed car is sold at an auction the proceeds may not be sufficient to pay the balance you owe. If your car was repossessed and you had a balance remaining, some creditors will require you to pay it and some will not. If you have an old debt that is still lingering because of repossession, contact the creditor to make arrangements to pay. Sometimes you can settle for less than the balance owed.

Instructions

1

Find out who you should pay. Many creditors turn remaining repossession balances over to a collection agency or third-party debt collector. Contact the creditor and it will let you know which company is handling your debt. Call the collection agency and make arrangements to pay. You may be able to get a reduction on the balance. The collection agency will give you the address to send your payment.

2

Negotiate to have the derogatory credit information removed from your file as a condition of paying off the debt; otherwise, this information will remain on your credit file for seven years. Some creditors will agree to your demands and others will not. If your creditor agrees, make sure you get everything in writing before you pay the debt.

3

Check on the statute of limitations. If the statute of limitations has run out on the debt, the creditor can send letters and make phone calls asking for payment but cannot bring legal action against you. The statute of limitations can vary from state to state.

Even though the statute of limitations has run out, this debt will still be on your credit report if the seven-year time frame has not passed. When you apply to buy a home, the mortgage company will make you pay it off before lending to you.

4

Choose the method of payment. If you can send a check for the full balance, that will be the end of it, and your check will serve as your source document or receipt. You can pay with a credit card, but you will incur finance charges if you carry the balance. Some bill-pay services allow you to pay electronically online.

5

Update your credit file. Make sure the collection agency reports your account as paid in full. It should show as a paid repossession. Order a free copy of your credit report after 45 to 60 days to make sure it is correct. If the information is not correct, contact the credit reporting agency with the new information.