Unfortunately, given how bad the economy has been lately, it’s not uncommon for most folks to be forced to give up a large amount of their financial freedom and security. In fact, as of writing this, car repossessions nationwide have gone up more than 23%, as more and more Americans are falling behind on their loan payments. Aside from that, this now opens up a whole new can of worms – do you have to notify the DMV if your car is being repossessed?
Well, the answer is complicated. In most cases, you don’t have to notify the DMV if your car is repossessed, because that responsibility usually falls onto the lender or repossession agency to let the DMV know. However, in some other states, you’ll have to notify the DMV and surrender your license plates back to them in the event of a repossession. So, the easiest answer is to just call your local state DMV office and ask them about whether or not you’ll have to notify them.
Now, to elaborate a bit more on what I mentioned earlier; in most states, the responsibility of notifying the DMV about a car’s repossession lies with the lender or the repossession agency. With that said, they’re the ones who have to notify the DMV so that their records on that car have been updated to reflect its change in status and ownership. This is simply them telling the DMV that the car in question is no longer in the possession of the original owner and that the title is in the process of being transferred.
1) Who Notifies The DMV About A Repossession?
However, be warned that DMV policies change a lot from one state to another. In some states, the original owner has to take additional steps, including surrendering the license plates back to the DMV, as well as formally notifying the DMV that you no longer own the vehicle. As such, it’s important to contact your state’s DMV and ask them about what to do next, because non-compliance could lead to a lot of problems and complications down the line for you, including:
- You have to be responsible for any future registration fees, taxes, or other penalties related to the car, even though it’s no longer in your ownership.
- Being charged unnecessarily for renewal fees for the license plates on your car, which applies to states where the plates are assigned to the owner, not the car.
- The DMV might even continue to send you vehicle registration renewal notices, even though you no longer own the car since the DMV isn’t aware that it’s been repossessed.
As I noted earlier, in certain states, you’ll have to manually notify the DMV yourself if your car has been repossessed, which will require you to take additional steps. This includes needing to surrender your plates to the DMV, as well as a bunch of other specific requirements to properly finalize a car’s legal and financial responsibilities.
2) Which States Require You To Notify The DMV?
While I don’t have the complete list of states, here are examples of some states where it’s up to you, the owner of the car being repossessed, to notify the DMV:
- California – The lenders or repossession agencies are responsible for notifying the DMV, but the owner also needs to make sure that the car’s DMV records have been updated. You might also have to surrender your plates back to the California DMV, too.
- New York – If your New York-registered car has been repossessed, you’ll have to notify the NY DMV and surrender your license plates. Otherwise, you might be unnecessarily charged for its registration fees in the future (even though you no longer own the car).
- Louisiana – Just like California, the lender or repossession agency is responsible for letting the DMV know, but there are also some additional steps that you, the owner, need to take. This is mostly to clear up any lingering obligations for that car or to formally transfer the title.
- North Carolina – Similar to New York, the North Carolina DMV requires that owners whose cars have been repossessed need to surrender their license plates.
Again, if you’re not sure whether or not your state falls under this category, all you need to do is call up the DMV, email them, or just visit their information desks in person to ask them. Your state’s DMV will be better suited to provide you with all the specifics on what you’ll need to do.
3) What Happens If You Don’t Notify The DMV?
Let’s assume for a second that you (or the lender) didn’t properly notify the DMV about a car that’s been repossessed… What happens now? Well, quite a few complications can arise, and none of them is going to be simple to solve, so here are some examples:
- You, the owner, could continue to be responsible for the car’s renewal fees, property taxes, or even traffic violations, despite the car having been repossessed. Remember, since you haven’t notified the DMV, that car could still technically be under your name.
- Worse, if that repossessed car gets involved in a traffic accident or was ticketed for a parking violation, the DMV’s records will still mark these incidents under your name. That’s because if you fail the notify the DMV and update your records, you’re still technically that car’s current, registered owner.
- Additionally, this means that the car’s previous owner – which according to the DMV’s records, it’s still you – will continue to be liable for parking tickets, citations, or even being sued for any damages in the event that it gets involved in an accident.
- Another issue that’ll appear by not letting the DMV properly know your car was repossessed is the impact it’ll have on your credit. Again, the car may still remain under your name, according to the DMV’s records, so it’ll be pretty hard to dispute any remaining debt associated with that car. It might even make it harder for you to buy a new car or finance it in the future.
4) What To Do After Your Car Was Repossessed?
Even if you don’t have to notify the DMV after your car is repossessed, there are a few things that you could still do, mainly to tie up any loose ends legally and financially. Here are some of the more important steps you should take, that I’d recommend:
- First off, it’s a good idea to confirm with your lender that they have already notified the state DMV about repossessing your car. You should first contact the DMV to ensure that your car’s ownership details and status have been updated. If it hasn’t been done already, then you ought to follow up with your lender and press them to do it ASAP.
- While you’re contacting the DMV, you should also verify with them that the repossessed car is no longer under your name in the DMV’s records. If that car is still under your name, then you will have to follow up with the DMV – and they may ask you for additional documentation – to correct and update their records.
- Next up, make sure you’re on top of any remaining financial obligations to that car. Even after the repossession, you might still owe money on the loan, which is usually called the ‘deficiency balance’. You’ll have to work directly with your lender to settle this debt and avoid it damaging your credit down the line. Alternatively, your lender may also be willing to negotiate a reduced amount or payment plan to settle the remaining balance.
5) Surrendering Your Plates And Canceling Insurance
As I touched upon earlier, in those states where license plates are assigned to the owners, not the car itself, you’ll often be required to surrender your license plates back to the DMV. If you need more specifics about what returning your license plates to the DMV looks like or what it entails, check out my other, in-depth guide of how it’s done in New York.
Now, aside from surrendering your license plates to the DMV, another important step that you absolutely can’t forget is canceling your car’s insurance. Otherwise, you’d be paying insurance premiums for coverage on a car that you no longer own or drive. Just make sure that you only cancel your car’s insurance after notifying the DMV, and that the DMV’s records were updated properly.
If not, canceling the insurance prematurely could lead to any coverage gaps or penalties. This is especially bad if the DMV requires proof of insurance for the period where that car was still registered to you.