Can a credit union refuse payment on an auto loan that is in default?

UPDATED: Jun 15, 2011

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Can a credit union refuse payment on an auto loan that is in default?

I am one month behind on my auto loan. I have been continually late on my payments but they are always paid. They are now refusing a payment and told me I had 3 days to either refinance or voluntarily turn in my vehicle.

Asked on June 15, 2011 under Bankruptcy Law, Colorado


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

For a definitive answer, you need to review in detail the terms and conditions of your loan--or better yet, have an attorney review them with or for you--since a loan is basically a contact; it's terms will control or govern.

That said, some general principals:

1) Even if you ultimately always pay in the end, you have *no* right to pay late, unless the agreement specifically allows you to do so. Otherwise, by paying late, even if you later pay off the amount due, you are breaching the agreement.

2) Once you have breached the agreement, the lender may pursue its recourse or remedies, such as repossessing the car--again, agreements like these are contracts, and once breached, the other party is entitled to any remedies allowed under the agrement or to consider the agrement terminated and seek repayment in full (e.g. refinancing) of any outstanding amounts.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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