The Right to Cure in Auto Repossession

by Tom Streissguth

Defaulting on a car loan can lead to a repossession of your car, which usually takes place without the debtor's awareness. Auto lenders seeking to get their collateral back must jump through some legal hoops, however, and would in most cases prefer just to get the loan current and have you start paying again. Fortunately, most states require lenders to give their borrowers time to do just that, a legal mandate known as the "right to cure." If you're in the danger zone for repossession, brush up on your state's laws and prepare to defend your wheels by curing your loan.

The Right to Cure Basics

The right to cure gives a buyer a grace period in which to catch up on payments before a repossession takes place. Some states require dealers to send a written notice to a buyer whose loan is in default, detailing the right to cure and explaining its terms.

Even if there is no mandated right to cure, you may have a chance to get the loan current. In some states, for example, the courts have established a right to cure if a lender has accepted late payments from the buyer. This would hold true even if the loan contract states that a missed payment results in immediate default, since the lender has already, in effect, waived the contract terms. A lender may be required to issue a notice of the intention to repossess your car, meaning you'll at least have fair warning.

State Laws Vary

The right to cure varies from state to state. In Missouri, for example, the law requires a lender to wait until the account is at least 10 days past due, then send a written notice of default to the borrower giving at least 20 days to bring the loan current. If the borrower does so, but then falls behind again by at least 10 days, the lender must issue a second notice of the right to cure with another 20-day grace period.

Not all states require advance notice, or mandate a right to cure period for borrowers in default. In North Carolina, for example, no notice is required -- lenders can repossess a car without notice or a court hearing, simply in the event of a default. If this is the situation in your state, examine the loan contract, or simply contact the lender, to find out how the agreement defines "default." It may be 30 days after a missed payment; it may be the day after. If no advance notice is required, the tow truck will eventually show up, and you'll only receive the notice of default and repossession after your driveway is empty.

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