"Dude, Where's My Car?" may be the name of a lame Ashton Kutcher movie, but it could also be your response as you realize that your car has been repossessed.

Just like a home, a car is not yours until it is fully paid off. The creditor has the right to repossess it under certain circumstances, typically for failure to make payments. The same principle applies to purchased and leased cars.

If your car has been repossessed, what action should you take? We suggest starting with the half-dozen below.

1. Assess Damage – Repo companies have the right to take your car, but not the right to damage your property or use excessive force in the process. Document any property damage or other harm caused by the repo agency. You may be able to take action and get reimbursement for the damage, and potentially even have the car returned to you.

2. Find Out The Reason – If you haven't been making payments, you know the reason why your car was repossessed. Otherwise, contact the creditor to find out why. There could have been a mistake with processing your payment, or the repo agent could have grabbed the wrong car by mistake. Failure to fulfill the insurance requirements in your loan/lease may also allow for repossession.

3. Check Your Local Laws – The creditor will sell the car at auction to recover costs after giving you a "reasonable time" to consider your options and to act. Ten days is generally the minimum, but state laws vary regarding the notification and time lag between repossession and sale. Find out how much time you have to act and what the options are in your area.

4. Get Your Possessions – The creditor may keep your car, but not its contents. Make sure to retrieve your possessions from the car as soon as you can arrange transportation to the lot where it is being kept. Assuming you plan to get the car back, check it over for any damage that occurred during the repo process. Any damage may affect your decision to reclaim the car.

5. Review Your Financial Options – Whether you keep the car or not, you still have financial decisions to make. Options vary by state, but you may be able to reinstate your loan (pay off all payments missed, repo charges, and other penalties), pay off the whole loan ("redeeming" the car), or wait until the auction and attempt to buy your car back there.

6. Limit the Credit Damage – Generally, a repossession action will remain on your credit report for seven years. You can't do anything about that, but you can do other things to offset the drop in your credit score, such as limiting your debt and making sure that you pay at least the minimum amount on all your bills on time, every time. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

Can you afford to keep the car and make the necessary payments, as well as handle the other running costs of owning a car such as gas, maintenance, and insurance? Do you have available public transportation or other options that make a car less critical? Assess the situation and decide whether to try to get the car back or simply let it go.

Note that you could still owe money even if you lose the car. If the car sells at auction for less than the balance of your loan, you are still on the hook for the difference. You must find out from the lender if you still owe money, and work out the terms of payment if you do.

It's never good to have a car repossessed, but it's not the end of the world. Keep your cool and follow the steps above, and you can minimize the pain of relying on alternate transportation. You may have to start asking, "Dude, Where's My Bus?"

If you are interested in an auto loan, visit our curated list of top lenders.


Photo ©iStockphoto.com/WoodenDinosaur

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