Summary
- Each state’s statute of limitations establishes when it is too late to seek repayment for a loan.
- You might not be shielded from having your car repossessed by the statute of limitations in your state.
- You won’t have to be concerned about debt collection or property seizure if you adhere to the terms of your loan agreement.
You may have been concerned about what would happen next if you’ve ever taken out a loan for a car and later realized you wouldn’t be able to make the required payments. While there are some ways to exit loans you cannot afford, it’s crucial to comprehend how auto loans function and what you are ultimately responsible for.
You might not have made your car loan payments for months or even years without receiving communication from the lienholder. But do not believe that your silence absolves you of responsibility.
You will still be required to repay the full amount of the loan, unless the statute of limitations has passed. And even if the statute of limitations has passed, the lienholder may still take possession of your car as payment.
What is the statute of limitations on auto loan debt?
Where you live has a significant impact on the statute of limitations. A statute of limitations may be three years in some states or up to ten years in others.
The following states have a three-year statute of limitations for collections with a written loan debt agreement:
States whose statute of limitations last for four years include:
The following states have a five-year statute of limitations:
When it comes to the statute of limitations for a written contract, six years is the most frequently used duration. U. S. states that uphold a six-year statute of limitations include:
While several states, including Wyoming, West Virginia, Rhode Island, Missouri, Louisiana, Kentucky, Iowa, Indiana, and Illinois, observe a 10-year statute of limitations, Ohio and Montana adhere to an eight-year statute of limitations.
The first step in determining whether your lienholder can still seek payment from you for your auto loan is to be aware of your state’s statute of limitations for debt. Keep in mind that the statute of limitations may differ from what is stated above if you and the lender reached an oral agreement or if you have multiple personal loans.
If I have passed the statute of limitations, am I in the clear?
Even if the statute of limitations on your auto loan has passed, this does not mean the vehicle is now yours and you can stop worrying about it. First, there are ways your debt could be essentially restarted.
For instance, your written agreement regarding repaying the debt may have restarted if you added extra cars or bells and whistles to your car loan or if you made any changes to the loan, making it likely that you no longer surpass the statute of limitations.
Additionally, even if you have exceeded the three to ten-year mark for your state, the business through which you obtained the loan may still be able to simply seize your car in order to make at least a portion of the debt you owe.
How can my car be repossessed if I’ve passed the statute of limitations?
The statute of limitations applies only to legal actions that may be brought against you to compel you to make certain payments. However, the business is not required to file a lawsuit in order to repossess a car or any other item.
The statute of limitations therefore serves as a kind of deadline for someone to sue you, but if you still have an active lien on the account, your car may be repossessed at any time.
Additionally, your car might be repossessed if the statute of limitations in your state has not yet expired or has, and you might still be required to make further payments to make up the difference. This typically occurs if the lienholder sells the vehicle to a third party for less money than you still owe on it.
Can I avoid having my car repossessed?
Making your monthly payments on time is the simplest way to prevent having your car repossessed. There are steps you can take to prevent having your car repossessed if you realize you cannot afford the required car payments.
If you have fallen behind on your payments but are able to catch up, your loan may be reinstated. You should review your loan agreement to determine if there are any requirements for loan reinstatement. If you damaged the car, this is one of the main reasons a loan reinstatement might not be possible.
People who are unable to make the additional payments necessary to reinstate their auto loan may be able to speak with the lender to learn about their options. You might be able to negotiate a new deal for your car if the lender wants to avoid the hassle that comes with reclaiming a vehicle.
Other choices include self-selling the vehicle, giving it up, or renegotiating the loan. All of these require the approval of your lender.
What’s the bottom line?
Depending on where you live, your auto loan may be too old to be repaid after three to ten years. However, just because the state’s statute of limitations on your loan has passed does not necessarily mean you are out of luck.
Due to your missed payments, your vehicle may be repossessed at any time. If the car sells for less than what you owe in this case, you might still be required to pay the difference.
Your best option if you are unable to make the required auto payments is to speak with your lender to see if there is anything you can do to resolve the situation. This might help you maintain good relations with your lienholder and provide you with additional options for repaying your debt.
FAQ
What happens if I dont pay deficiency balance?
The debt will probably be sold to collections if you don’t pay. However, the lender or the collector may decide to sue you, which could lead to a levy on your wages, a lien on your other property, or a levy against your bank account.
How long can a car loan come after you?
The maximum length of time you can finance a car is 96 months, though not all lenders will offer the shortest or longest options. While the typical car repayment term is 72 months, there is a range of repayment terms that can be as short as 12 months and as long as 96 months.
Do car loans go away after 7 years?
After seven years, if you are late on a payment and then catch up, the late payment will be eliminated from the account, but not the entire account. In that case, only the delinquencies that have been present for at least seven years but before the account became current will be eliminated.
What happens when a car loan goes to collections?
The lender might send the debt to a collections agency. The unpaid debt will also likely appear on your credit report. This can make it difficult to qualify for additional loans. If you keep skipping payments, the lender or creditor may try to recoup their losses and seize your vehicle.