Nobody wants to feel trapped by a car loan that’s become a financial burden. At Campbell Saunders, we understand the stress of falling behind on car payments. Especially when you are also dealing with other debt.
There is good news in British Columbia. In the province of BC, borrowers have important legal actions under the Personal Property Security Act (PPSA). These protections are known as “Seize or Sue.” They can make a big difference if you cannot afford your auto loan.
Below, we explain your options, how Seize or Sue in BC works, and what to consider if you are struggling with your car loan payments.
Prefer to speak to someone? Our consultations are always free >
What Should I Do If I Can’t Afford My Car Payments?
If your car payment is becoming difficult to manage, the best time to look at your options is before you start missing payments. Take a look at your budget and ask whether this is a short-term problem or whether the car payment is no longer affordable alongside your other expenses.
If you’re already falling behind, what you do next depends on where things stand:
- If you haven’t missed a payment yet: Review your budget and contact your lender if you expect to have trouble making an upcoming payment. They may be willing to discuss a temporary deferral or modified payment arrangement.
- If you’ve missed payments: Contact your lender and find out exactly what you owe. Keep records of your conversations and any notices you receive.
- If the loan is in collections: Keep track of calls, amounts owing and correspondence. If other debts are also becoming difficult to manage, this may be a sign that it’s time to look at your overall financial situation.
- If you’re thinking about giving up the car: Get advice before voluntarily surrendering it. In BC, how the vehicle is surrendered can affect your Seize or Sue protections.
- If repossession has already started: Don’t ignore notices from your lender. Depending on where you are in the process, there may still be options available to you.
Signs Your Car Loan Is Becoming Unaffordable
You may be struggling with your car loan if you’re using credit cards to make payments, regularly paying late, skipping other bills to keep the car, or finding it difficult to afford gas, insurance and repairs on top of the monthly payment.
If this is happening regularly, it may be time to look at whether the vehicle is still affordable and how the car loan fits into your overall debt.
What Is “Seize or Sue” in BC?
If you default on your car loan in BC, your lender must make a choice. They can either seize the vehicle or sue the borrower, but they cannot pursue both simultaneously. This means they can’t repossess your car and demand further loan payments.
Seize: If the lender decides to repossess the item (a “non-voluntary” surrender), that’s generally the end. Once they take the car, the debt is considered settled. They cannot pursue you for any shortfall, even if the car’s value is less than the remaining loan balance.
Sue: Instead of taking the car, the lender can sue you for the outstanding balance. This might lead to collection actions such as wage garnishment. If they choose this option, you keep the vehicle, free of the secured loan.
Borrower Protections Under Seize or Sue
If you are asking “what are my options if I can’t afford my car payment in Canada?” and you live in BC, here’s what to know:
- Two-Thirds Rule: If you have repaid two-thirds of your car loan (or more), the lender must obtain a court order before they can repossess your vehicle. This is a good thing, especially if you are near the end of your loan. However, if the lender successfully sues you, they may recover the outstanding balance through measures such as asset seizure or wage garnishment.
- Voluntary Surrender Warning: If you return the car on your own, you might inadvertently void your “seize or sue” protections and still be liable for the shortfall of the loan. Always seek advice before making this decision.
- Leased Vehicles: The “Seize or Sue” rule does not apply to leased vehicles. Leasing companies can repossess your car and still require you to pay the remaining balance stated in the lease agreement or loan terms.
- Loans Outside of BC: If your car was purchased or financed outside BC, the rules may differ. Always confirm which laws apply with a Licensed Insolvency Trustee (LIT).
Have other financial worries? Discover your options >
What Happens When a Vehicle Is Repossessed in BC?
If you default on your car loan, such as by missing payments, the lender may decide to repossess the vehicle. The process generally looks like this:
The loan goes into default: This usually happens after you miss payments.
The lender decides to seize the vehicle: You may receive notice that the lender intends to take the vehicle in satisfaction of the debt. While you still have the car, keep it insured and avoid any damage that could affect your Seize or Sue protections.
A bailiff collects the vehicle: Remove your personal belongings and licence plates so you can cancel your insurance.
You receive a Notice of Disposition: At least 20 days before the vehicle is disposed of, you will generally receive details about the amount owing and the planned sale. Depending on your situation, you may still have an opportunity to bring the loan back into good standing.
The vehicle is resold: The lender may sell the vehicle privately, publicly or through an auction.
If you’re facing repossession, it’s a good idea to understand your options before surrendering the vehicle or making any other decisions that could affect your rights.
When Rules Differ Across Canada
Not every province in Canada follows the same rules as BC. Some lenders, especially those based in Eastern Canada, may still attempt to collect a shortfall after repossession. If this happens and your loan is registered in BC, the borrower typically just needs to remind the lender that the rules in BC are “Seize or Sue”.
What If Your Car Payment Is Part of a Bigger Debt Problem?
Navigating vehicle loan challenges can be complex with so many variables. You don’t have to face them alone. Campbell Saunders can help review your unique situation, clarify your rights and options, and work with you to create a debt strategy that reduces stress and protects your financial future.
Need someone on your side? Meet our team. We are here to help >
Frequently Asked Questions About Car Payments and Repossession in BC
What happens if I stop paying my car loan in BC?
If you default on a secured car loan, your lender may have the right to repossess the vehicle. For consumer goods in BC, the Personal Property Security Act also sets out specific rules about the remedies a secured lender can pursue after default. Your exact situation will depend on your loan agreement and whether the vehicle and agreement fall within these protections.
Can a lender repossess my car without a Court order in BC?
Generally, a secured lender has the right to take possession of its collateral after default. However, there is an important exception for consumer goods: if you have paid at least two-thirds of the total secured obligation, the lender cannot seize the vehicle unless it obtains a Court order allowing it to do so.
Do I still owe money after my car is repossessed in BC?
If the Seize or Sue rules for consumer goods apply and the secured lender repossesses the vehicle, your remaining obligations under the security agreement are generally extinguished. There are exceptions, including circumstances involving substantial damage caused by wilful or reckless acts or neglect, so it is important to confirm that the rules apply to your specific situation.
Can I get my car back after it has been repossessed?
Possibly. Before the vehicle has been sold or the lender has contracted to sell it, BC law provides rights to redeem the vehicle. Where the collateral is consumer goods, you may also be able to reinstate the agreement by paying the amounts actually in arrears, correcting any other default and paying reasonable repossession-related expenses. There are limits on how often the right to reinstate can be used.
How much notice do I get before my repossessed car is sold?
In most cases, the secured lender must provide a Notice of Disposition at least 20 days before disposing of the vehicle. The notice includes information about the debt, arrears, applicable expenses and the planned disposition. There are specific circumstances under BC law where this notice is not required.
Should I voluntarily surrender my car if I can’t afford the payments?
Don’t make this decision without first understanding how the rules apply to your agreement. BC’s Personal Property Security Act includes surrender of consumer goods among the remedies that can extinguish the remaining obligations under the security agreement when the requirements of the Act are met. Because the outcome depends on the type of agreement, how the vehicle is used and the circumstances of the surrender, speak with a Licensed Insolvency Trustee before proceeding.