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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Apr 18, 2022

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Summary

  • Each state has its own statute of limitations that dictates when it’s too late to collect money from a loan
  • The statute of limitations in your state may not protect you from having your car repossessed
  • If you honor the terms of your loan agreement, you will not have to worry about debt collections or repossession of your property

If you’ve ever taken out a loan on a car and later realized you would not be able to make the proper payments, you were likely worried about what would happen next. While there are some things you can do to get out of a loan you can no longer afford, it is important to realize how auto loans work and what you are ultimately responsible for.

You may have neglected to pay what you owe on your car for months or even years without hearing from the lienholder. But do not assume that silence means you are off the hook. 

Unless you have exceeded the statute of limitations when it comes to your loan, you will still have to pay back all the money you owe. And even if the statute of limitations has come and gone, your car could still be repossessed by the lienholder as a form of payment.

What is the statute of limitations on auto loan debt?

When it comes to the statute of limitations, that completely depends on where you live. Some states have a statute of limitations that extends three years, while others go up to 10. 

With a written agreement concerning loan debt, the following states have a three-year statute of limitations for collections:

  • South Carolina
  • North Carolina
  • New Hampshire
  • Mississippi
  • Maryland
  • Delaware 
  • Alaska

States whose statute of limitations last for four years include:

  • Texas
  • California
  • Pennsylvania

The following states have a five-year statute of limitations:

  • Virginia
  • Oklahoma
  • Nebraska
  • Kansas
  • Idaho
  • Florida
  • Arkansas

The most popular length of time when it comes to the statute of limitations for a written contract is six years. U.S. states that uphold a six-year statute of limitations include:

  • Wisconsin
  • Washington
  • Vermont
  • Utah
  • Tennessee
  • South Dakota
  • Oregon
  • North Dakota
  • New York
  • New Mexico
  • New Jersey
  • Nevada
  • Minnesota
  • Michigan
  • Massachusetts
  • Maine
  • Hawaii
  • Georgia
  • Connecticut
  • Colorado
  • Arizona
  • Alabama

Meanwhile, Ohio and Montana observe an eight-year statute of limitations, and several states observe a 10-year statute of limitations, including Wyoming, West Virginia, Rhode Island, Missouri, Louisiana, Kentucky, Iowa, Indiana, and Illinois.

Knowing your state’s statute of limitations when it comes to debt is the first step in understanding whether your lienholder can still collect money from you for your auto loan. Keep in mind that if you came to an oral agreement, or if you have multiple personal loans, the statute of limitations could be different from what is listed above.

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If I have passed the statute of limitations, am I in the clear?

Even if you have exceeded the statute of limitations on your car loan, this does not mean the car is yours and you have nothing to worry about. First, there are ways your debt could be essentially restarted.

For example, if you added additional vehicles or bells and whistles to your car loan, or if you made any changes to the loan, your written agreement with regard to paying back the debt could have restarted, making it likely that you no longer exceed the statute of limitations.

Additionally, even if you have gone past the three to 10-year mark for your state, the company through which you received the loan could simply repossess your vehicle as at least partial payment for the money you owe.

How can my car be repossessed if I’ve passed the statute of limitations?

The statute of limitations is specific to legal action someone can bring against you in requiring you to make specific payments. But repossessing a car or any other item does not require the company to file a lawsuit. 

So while the statute of limitations stands as a deadline of sorts to file a lawsuit against you, your car can be repossessed at any time if you still have an active lien on the account. 

Additionally, if you have not met or exceeded the statute of limitations in your state, your car could be repossessed, and you may still have to make additional payments to make up the difference. This typically happens if the car is sold by the lienholder to someone else at a price that is lower than what you still owe on the vehicle.

Can I avoid having my car repossessed?

The simplest way to avoid having your car repossessed is to make your monthly payments on time. If you realize you are unable to make the necessary payments for your vehicle, there are some things you can do to avoid having your car repossessed.

If you have missed your payments but are able to make all the missed payments, you could have your loan reinstated. You should read through your loan agreement to see if there are any stipulations for a reinstatement of the loan. One major reason a loan reinstatement may not be possible is if you damaged the car.

For people who are unable to make up the payments to reinstate their car loan, it may be possible to speak to the lender to see what options are available. If the lender wants to avoid the hassle that goes along with repossessing a vehicle, you may be able to work out a new agreement for your car.

Other options include selling the vehicle yourself, surrendering the vehicle, or refinancing the loan. All of these require the approval of your lender. 

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What’s the bottom line?

Your auto loan may be too old to be collected anywhere from three to 10 years, depending on where you live. But just because your loan has exceeded the statute of limitations in your state does not mean you are out of the clear.

Your car could be repossessed at any time as a result of being deficient in your payments. If this happens, you may still have to make up the difference if the car sells for less than what you owe.

If you are unable to make the necessary payments on your vehicle, your best bet is to contact your lender to see if there’s anything you can do to get things sorted out. This could help keep you in the good graces of your lienholder and open up other options when it comes to repaying your debt.