Is a voluntary repossession better?

It may reduce repossession costs, but it is still usually reported as a repossession and you may still owe a deficiency.

How long does a repossession stay on my report?

Generally 7 years from the original delinquency, under FCRA § 605.

Repossessions on Your Credit Report

How repossession works

When a secured loan — usually a car loan — goes into default, the lender may take back the property. Repossession can be involuntary or voluntary (you surrender it); both are generally reported as negative. The lender then usually sells the property and applies the proceeds to what you owe.

The notices you’re entitled to

Under Article 9 of the Uniform Commercial Code, adopted in some form in every state, a lender generally must send you reasonable notice before selling repossessed property. For consumer goods, the notice must describe the sale, tell you that you may owe a deficiency, and tell you how to get an accounting. Every part of the sale must be “commercially reasonable.” After the sale, if the lender seeks a deficiency, it generally must send an explanation of how the deficiency was calculated. State law adds its own rules — some states require a notice of your right to cure or to redeem the vehicle.

The deficiency balance

If the sale brings in less than you owe (plus allowed costs), the difference is the deficiency. If the lender didn’t follow the notice or sale rules, many states limit or eliminate its right to collect that deficiency — and may give you a claim for damages.

Repossession reporting errors

A deficiency balance that doesn’t match the sale records, or includes charges not allowed
The sale proceeds never credited to the balance
Monthly late payments reported after the repossession and sale
The original lender and a collector both showing the deficiency balance
A wrong date of first delinquency

What you can do

Request the sale notice, the accounting and the deficiency explanation in writing. Compare them to what’s reported. Dispute inaccurate information with the bureaus and the lender. Because the rules vary by state, if the lender may have skipped required notices, consider speaking with a consumer attorney.

Sources: Uniform Commercial Code §§ 9-610, 9-611, 9-614, 9-616, 9-625 (as adopted by your state); Fair Credit Reporting Act, 15 U.S.C. §§ 1681c, 1681i, 1681s-2.