How to keep the car when an auto loan is charged off

Submitted by justin.oscar on Wed, 06/03/2009 - 07:48

Your car loan is charged off when you have been delinquent on your account for 180 days. The lender writes off this debt as a loss, as they realize that the debt won't be paid. An auto loan charge-off is a negative mark on your credit report and it hurts your credit score. A loan charge-off does not mean that the loan has been forgiven, and you are still obligated to pay the debt. The interest and late payments will continue to accrue. Generally a charged off debt is handed over to a collection agency.

Can you keep the car after charge-off?

You can keep your car after the charge-off only if you pay off the debt. The lender won't release the lien on the car until the loan is repaid. The car can be repossessed if you do not pay off the debt. Even if the lender does not seize the car, you won't be able to sell it or refinance it. Moreover, you are still liable to pay off the debt even though you have lost your car.

However, repossession laws differ according to the state you live in. Thus, you need to know your state law regarding car repossession. Some states allow the lender to seize your car without notice at any time after you fail to make the payments on your car loan. But, most of the states have a breach of peace regulations on car repossession. If the individuals repossessing your car commit a breach of the peace while seizing your car, your lender may have to pay a penalty and the repossession may be temporarily halted.

How to handle an auto loan charge-off

If you want to keep your car and remove the charge-off from your credit report, you will have to negotiate a payment plan with your lender. Make sure you get the payment agreement in writing. Once you pay off the debt, you may get the car back. As for the charge-off, you will have to negotiate a Pay for delete Agreement (PFD) with your lender to remove the charge-off from your credit report. A charge-off will be considered a negative listing on your credit report, which will cause creditors and lenders to deny you credit. Therefore, it is better to try and remove the charge-off with a PFD if the lender will agree.

The best way to prevent your car from being repossessed is to repay the loan. There are several options, like a loan modification agreement, available to consumers who wish to keep their vehicles.

Hi justin.oscar,

A charge-off does not mean that you will not have to pay down the debt. It means that your creditor has written your account as a loss for his company, because you have defaulted on loan payment for a continuous period of 6 months or more. It is likely that a collection agency is continuing with the collection practice for your account. They have given you only 2 weeks time, so you do not even have the time to ask for debt validation.

If you do not pay within the 2 weeks time period, the CA can take legal action against you. If they win the case, they can get an order from court to garnish your wages, to pay off the debt. I think you should pay the installment amount the CA has mentioned, after you come to a pay for deletion agreement with them. You will find a sample Pay for Deletion Letter in the Letters of Credit section.

If you do not pay off the debt, interest will keep accruing. It is also possible that the CA would add to it the amount involved in the legal proceedings.

Wed, 06/03/2009 - 08:49 Permalink

Hi justin.oscar,

Whether your car will be repossessed by your creditor/collection agency, depends on them. Even if your car is repossessed and sold off to pay the debt, you will still be liable to pay if any balances are remaining. You will also have to repay for any costs involved in the whole transaction.

I think the best option is to accept the payment offer that the creditor/CA has given to you. In that case you can retain your car and also avoid unnecessary legal complexities.

Wed, 06/03/2009 - 09:13 Permalink

Thanks for the replies guys. I just had another car repossed on myself within the same time period so I am finding it hard to get the money for this together at this moment.

Wed, 06/03/2009 - 20:12 Permalink
Jesse (not verified)

I have a car that was charged off over three years ago. I was never contacted by anyone and noone ever tried to repo the car. This car is clunker does not run or work... what do I ? how can I get rid of the car ?

Mon, 07/27/2009 - 17:48 Permalink
Sam Jackson (not verified)

My car was charged off and the repo people are trying to take it. I sent a payment to the creditor which is not the repo company.Will that payment be subtracted from the amount I owe?

Wed, 10/21/2009 - 23:06 Permalink

It should be. If you want you could send them a pay for delete letter to see if they are willing to remove the charge off from your credit report once you have paid the debt in full. No guarantees but it's worth a try.

Wed, 10/21/2009 - 23:22 Permalink
fishback (not verified)

can i get a loan to pay the settlement they offered, can they still repo it? will i be in trouble?

Sat, 10/24/2009 - 03:20 Permalink
Stephanie V (not verified)

I recently moved, could not pay for my car that doesn't run, but the car lot has not repo'd the car. Instead, they sent the debt to collections. If I file for bankruptcy, will I be able to keep the car? or will the car lot come after it?

Wed, 10/28/2009 - 18:44 Permalink

Hi Stephanie,

It all depends on the bankruptcy you file if you file chapter 7 and include the car they will come get it. If you file chapter 13 which is a repayment plan and you want to keep the car it is a secured debt so you will still have to pay them every penny you owe them through the plan.

Wed, 10/28/2009 - 20:27 Permalink
christy (not verified)

so say i want to file bankruptcy chapter 7 and dont include the car then what will happen ..

Tue, 12/08/2009 - 15:22 Permalink

if you keep the car then you have to continue making the payments. If not then they can repo the car.

Tue, 12/08/2009 - 15:42 Permalink
QUINN (not verified)

i just miss my first payment cause i just got a new car cant pay for the other car what should i do with it still o 6500???

Tue, 01/05/2010 - 00:35 Permalink

you could try selling it. Some car dealerships will buy the car back from you check with them. Some will take them back if you have lost your job or something that can not be helped. Give them a call.

Tue, 01/05/2010 - 13:59 Permalink
Monica65 (not verified)

I financed a car that was sold in a lein sale. I still have a balance. How will this effect m credit and do I have to continue to repay the loan?

Sat, 01/23/2010 - 03:16 Permalink
Anonymous (not verified)

My truck is almost paid off. I lost my job and fell behind on the payments. It was reposessed once, I paid fee's and all late payments and got it back. I now only have about 3 payments left and I'm falling behind again. I called them to make arrangements and they told me my account has been charged off. I am only 2 1/2 months late, can they still charge off my account? (because from everything that I have come accross so far, states that they charge off after 180 days) I live in Az but bought truck in Ca. Please help???

Thu, 01/28/2010 - 20:49 Permalink

I am assuming when they repossessed your truck is when they listed it as a charge off account not sure about how many days you have to be late in order for them to list it as a charge off though. Have you talked to them about this? Maybe you could try a pay for delete letter and since you only have 3 months left ask and see if they could reduce your payments which will take longer to pay off of course. But if they know you are facing some sort of hardship they may work with you.

Fri, 01/29/2010 - 09:00 Permalink
pittsburgh (not verified)

i fell behind in my car payments and they tried to repo it. however they cant find it. i recently received a letter from the bank stating they would like to settle and gave me 2 payment options the first one is a lump sum offer and the second is a payment matrix. i contacted the bank and they assured me as long as i follow the payments, they will aloow me to maintain poccession of the car, but i dont trust them i think they want me to let my gaurd down so they can find the car? car they still take the car even though i agreed and have started the payment settlement offer?

Fri, 02/19/2010 - 03:34 Permalink

Hi Pittsburgh,

You can go in for the settlement, but remember to get the settlement in writing. If the company tries to repossess your car after the settlement, you can produce the written settlement offer in court. Thus, first ask for the written settlement offer.

Hope this helps.

Fri, 02/19/2010 - 05:34 Permalink
re: pittsburgh (not verified)

I did get the settlement offer in writing they sent it to my house, and i then called to accept the offer. i spoke with someone from there asset recovery dept. the gentleman that i spoke with said they had no interest in the car the asset to them is the loan. however i felt that they are trying to get me to expose the car so they can take it!

Fri, 02/19/2010 - 16:36 Permalink
mrs houstonian (not verified)

I got my car back in 2006, and only paid for it like about 8 months only, after the 6 months I did not made any payments at all, they put my account in charge off and they have tried to repo my car a lot of times but they can't find my car and I drive my car every where even to mexico, and I have even gone to get the registration sticker for the car at the court house and nothing has happen, and the car lot where I got my car has not call me anymore since 3 yrs has passed, what can happen at this time after so long I had my car and still driven it???????

Wed, 02/24/2010 - 18:34 Permalink

Pittsburg, They would be held liable if they used those deceptive ways to get the vehicle back. they already have your home address and have not taken the car so why not just make the arrangement. The ar would not have to appear in person at the bank so as long as you do not drive it there you would not have no worries. the only other option you would have would to be do nothing and really risk being sued and definately losing your ride.
mrs houstonian, Pretty soon the car should be of little value to them. Sooner or later though they may just take yout to court and recoup their losses. you may want to get this settled if not you could end up with a judgment.

Wed, 02/24/2010 - 22:08 Permalink
pittsburgh (not verified)

Thanks for all the help! Ive started making the payments and all seems well for now!!! thanks again for your help..

Thu, 02/25/2010 - 14:39 Permalink

Hi Pittsburgh,

It is good to hear that your problems have already started to lessen :) . Hope that you will be able to come out of this problem very soon.

All the best.

Sat, 02/27/2010 - 10:18 Permalink
DON (not verified)

Hello all im just trying to find out what to do my was up for repo but the car lot didnt pick it up they just send it to collection agency when i pay it off do i get to keep the car and can i get the title. O and this is in AZ

Sat, 03/06/2010 - 00:48 Permalink
dee1104 (not verified)

I filed chptr 7 and has since been discharged. I bought a new car and all is well except that i still have the old car that was included in the bankruptcy. The finance company has no record of it even with the acct number. IThey said it has been paid off and it says the same on my credit report. So how can i obtain a title so i can sell it? I did continue paying on the car even after the bankruptcy but itwasn't going toward my credit so i bought a new car. Now I have someone who wants the car but don't know what to do.

Fri, 04/09/2010 - 18:58 Permalink

Hi Don:

If you make the payments, you will get to keep the car and get the title of car too. However, you can request the original creditor to pull back the account from the collection agency. If they comply to your request, you can try to negotiate a payment plan with the creditor and then start making the payments.


Can you tell me who is the one wanting the car? Also which car is that person wanting?



Sat, 04/10/2010 - 09:53 Permalink can he get the Title, of the car, if the Fianance Company has no record of it? Usually,..whoever you have the car financed through, THEY keep the Title until the car is paid off. (If I'm incorrect, someone please tell me).

Sun, 04/11/2010 - 09:25 Permalink
Debra (not verified)

I fell behind on my car payments last year, and the finance co sent me a demand letter for the balance of my loan ($5k). I didn't have the money (why would I be behind if I did?!), so I did nothing. I still have my car, it has not been repossessed. I now have the money to pay it off, but when I contacted the fin co, they said they didn't have my loan anymore & referred me to a collection agency who I've never received anything from. I attempted to work with them, but they seem VERY shady & for some reason when I requested something from them by mail, it never came. They want my bank acct info, and when I demanded that they at least fax me something, the vague letter was dated a day PREVIOUS to their null & void date for the payment agreement! I fear that they will pull something shifty after I give them my money & I'll never see my title. What should I do??

Mon, 04/19/2010 - 20:11 Permalink

Hi Debra,

You need to send the collection agency a debt validation letter through certified mail, requesting a return receipt (CMRRR). With CMRRR you will be able to retain the proof of the letter sent by you. CMRRR also provides you with the proof that the agency has received the letter. Moreover, they are not supposed to continue with the collection process.

You can also request your lender to pull back the account from the collection agency. Then if the lender agrees to your request, you can try and settle the outstanding debt amount with him.

However, remember to get the agreement in writing before you can start paying your lender or collection agency.

Hope this helps.



Tue, 04/20/2010 - 12:23 Permalink
Debra (not verified)

Aaron, I will follow your suggestions & let you know what happens. Thank you SO much for your advice!!


Wed, 04/21/2010 - 14:45 Permalink
Debra (not verified)

If the original creditor sends an auto loan to a collection agency, or if your original loan is "sold", who is the lien holder at that point?? The vehicle is still in my possession. Thanks.

Wed, 04/21/2010 - 16:58 Permalink


The collection agency to whom the loan had been sold to now holds the lien.



Thu, 04/22/2010 - 12:26 Permalink
Ray butler (not verified)

I have $2,900 left on my auto loan. I'm 150 days past due, the bank stop refinancing the car and want to reposses it. I am still going to pay them $300 a month until I paid them off. At this time they can't get the car. If I paid the loan off can I still get the title of the car?

Fri, 05/07/2010 - 17:57 Permalink


If you can pay off the loan you may keep the car. However, first talk about this to the bank.



Fri, 05/14/2010 - 11:30 Permalink
Alan (not verified)

While preparing divorce documents, I ran a credit report only to see that the auto loan I was told was paid off shows as a 12k charge off. The loan should have been paid off in 2008 and I cannot figure out from the credit report when exactly it was charged off however, I have retained possession of the vehicle. Up until running my credit a few days ago, I had no idea this was even an issue.

I have worked for the same company for 28 years and didn’t really move around much - I would think it would have been easy for them to repo? My ex is stating that it was paid but the finance co. is still showing as a lien holder on the current registration and I find it hard to believe that a charge off would be an error on a credit report. Any suggestions on what to do now? The vehicle is a 2001 and has 176k on it - Definitely isn’t worth the 12k I apparently still owe them.

Fri, 05/21/2010 - 12:38 Permalink


Can you tell whether any of you have the payment receipts?



Tue, 05/25/2010 - 11:18 Permalink
Joseph951 (not verified)

My finance company closed down and put a charge off on my account. I tried looking for them no luck its been almost a year. They are still the lienholders on my title what can I do?

Mon, 07/26/2010 - 00:32 Permalink

Hi Joseph,

You will have to pay off the debt in order to get the title to the car. You may also be able to remove the charge-off after payment, if the original creditor agrees to pull back the account from the collection agnecy.



Tue, 07/27/2010 - 12:20 Permalink
tasha williams (not verified)

I am currently 60 days past due on my account, as of October 15, 2010 was my pay off date for my account. I have a $7000 balance which are deferred payment. I do not have that money to pay up all at once can they repo my car? I just got a letter today saying that the balance will be reported on my credit & accrue interest, & they will not release my title until I pay the balance in full. But can the take car as long as I make payments?

Fri, 10/22/2010 - 01:53 Permalink
Jane Johnson (not verified)

I bought a boat dten years ago and have been paying every month on time since then. However I ran into financial straits and have several personal problems which did not allow me to continue to pay the monthly note. The bank has repoed the boat and sold it for practically one fifth of what it was worth, I even offered them a better amount which they refused. They now tell me they have charged off the loan but they still want the balance of 63,000 minus the 10,000 they got for it, so they want 53,000 + interest. What can I do???

Mon, 11/08/2010 - 23:18 Permalink
Sheila (not verified)

What if on my credit report it say paid charge off by the dealer are they still looking for the car??

Mon, 12/13/2010 - 01:32 Permalink

Back in late 2005 I purchased a used 2001 SUV and refi'd with another company for a lower rate in 2006 whom I made payments to until early 2007 when I had lost my job and was no longer able to make the monthly payments. I continuously fell behind until I couldn't make any payments at all any longer. I relocated with the vehicle in early 2008 to another state and ran my annual credit reports again to see they had officially charged-off the vehicle with a note that "customer has been located". I did submit a change of address and the vehicle was not being hidden and just waited for them to come and collect it or contact me - nothing.

Earlier this year (2010) I ran my annual reports and saw that the loan appears to have been sold to another company and has increased by 1/3 it's last known balance to over $25k.

I am not hiding at all and no one has come to get the vehicle nor have I received any correspondence from anyone at all! It's been about 4 years since my last payment.

I know that with the down fall of the economy many loans went bad and were covered by the Government to avoid bank closures...

I guess I am needing to know what my options might be. I am not going to pay a company that purchased my loan for pennies on the dollar the amount now listed on the my credit report. I am looking to negotiate with the new holder of the charged off loan or I will have to claim bankruptcy and they will get nothing.

Any advice? Where do I start?

Tue, 12/14/2010 - 00:39 Permalink
Dakota (not verified)

I am the reg owner my ex is on the loan the loan was charged off over three years finance co went bankrupt.Ex tryed to report it stolen Police told her nope he is the reg owner it is a civil matter. loan is gone finance co gone i reg the vechile soly in my name now.
What do i do to get title or to keep trk the loan is gone

Sun, 12/19/2010 - 05:10 Permalink
Dakota (not verified)

I am the reg owner my ex is on the loan the loan was charged off over three years finance co went bankrupt.Ex tryed to report it stolen Police told her nope he is the reg owner it is a civil matter. loan is gone finance co gone i reg the vechile soly in my name now.
What do i do to get title or to keep trk the loan is gone

Sun, 12/19/2010 - 05:13 Permalink
nancy james (not verified)

I was frequently late on paying my car loan payments buy did make sure payments got paid but didn't knw through out the loan process that they was charging me about 5 dollars a day when late! I knw owe 1 payment and a lot of late fees and other fees and now the lady is saying they are going to charge off I have now paid over 30,000 for a used honda civic I'm not interested in giving car up. I'm at a lost and unsure what to do now! I'm worried about loosing my car the last payment was due Dec 16th 2010!

Tue, 12/21/2010 - 19:15 Permalink
Bridgette (not verified)

I came out of a nasty divorce which resulted in me having two cars in my name. I filed bankruptcy in 2005, I reaffirmed one wehicle to keep and was letting the other one go in the bankruptcy. The lien holder contacted me immediately after I filed and told me to leave the keys under the front mat and park the car in front of my house and they would have someone come pick it up. It sat in front of my house for 11 months. I made numerous calls to the bank and they finally told me they charged off the vehicle and would not be picking it up. It showed as a charge off on my credit report also.

I have registered the car every year since and I am about to buy a new car. I am not sure what to do with this one. I thought about donating it to a charity but I cannot do it without a clear title. I have contacted the lien holder and asked if they can come take the car but they don't show any record of it at all.

Is there any way to get the title to this car? It is almost 7 years old now and has over 100k miles on it.

Wed, 01/05/2011 - 17:30 Permalink
CD (not verified)

I have a car that was charged off over three years ago. I was never contacted by anyone and noone ever tried to repo the car. With a little work the car can run. And we are needing the car. what should I do?

Mon, 01/31/2011 - 18:13 Permalink
harold (not verified)

I received a title loan on a car 4yrs ago, could not make the payments, but would like to make arraingments to settle up, how can I do this?

Mon, 02/14/2011 - 17:36 Permalink
Micah (not verified)

I live in CA. I bought a new truck in 2004. I've paid $800 per month for over 6 years (the term of the loan). During this term, I've accepted 4 extensions on the loan, which allowed me to skip those 4 payments, thus carrying them over to the end of the loan. Well now, the contract has reached its maturity date and has expired. I've continued sending my regularly scheduled monthly payments in an effort to pay the remaining $2800 due on the loan. The finance company has now begun a relentless attempt (virtually every day), calling me repeatedly throughout my work day, demanding the balance to be paid in full. I've explained on every occasion, I do not have the full amount to pay, but have offered to set up the approx 4 remaining payments to be made sequentially over the next 10 weeks.....IN FULL.

They refuse to negotiate with me and/or accept any type of agreement. They are also threatening to charge off the balance, negatively impacting my credit rating, and tell me I won't ever get the title to my vehicle even WHEN the small remaining balance is paid in full. I AM TRYING TO DO THE RIGHT THING HERE!

What are MY rights? And recourse?

Thu, 03/10/2011 - 04:11 Permalink
kal (not verified)

can a judgment removed if you paid what you owe and also can they take my car if its paid for

Mon, 03/21/2011 - 01:35 Permalink