Some states have laws that allow consumers to reinstate their car loans, essentially buying back the vehicle after it is repossessed, according to the Federal Trade Commission. To do so, the consumer must pay the past due payments and any additional fees caused by the repossession.
All payments going forward must be made on time and the consumer must meet all of the terms outlined in the reinstated loan agreement, notes the Federal Trade Commission. If a payment is missed, or a term of the loan agreement is violated, the vehicle can be repossessed again. However, the repossession may be avoided if the consumer is in regular contact with the lender and works out alternative arrangements.
Nolo outlines an alternative option for consumers who want to recover their vehicle but may not have the funds to pay all the necessary fees up front. However, the option involves filing for Chapter 7 bankruptcy. The filing must be done relatively quickly after the repossession as there is generally a short window between the repossession of the vehicle and the sale at auction.
Filing for Chapter 7 bankruptcy protection can force the lender to return the car as it is a part of the bankruptcy estate, explains Nolo. This can be done if there is nonexempt equity in the car, as it is considered an illegal preference. The consumer then has to reaffirm the original loan agreement, or agree to a modified one, to keep his vehicle.