A repossession occurs when a creditor reclaims property from a debtor when they have failed to make payments as agreed or have broken the purchase contract in some other way. When an individual purchases a vehicle on credit, the creditor retains rights to the vehicle until the final payment has been made and the vehicle is paid off.
The creditor’s interest in the vehicle is known as security interest. The extent of a creditor’s security interest is determined by the contract signed by the debtor and local state laws. In most cases, a security interest is created in a financial situation. The property involved is referred to as collateral.
Repossessions provide a process for creditors to reclaim property from debtors who have not made payments per their contract. The type of property reclamation most often occurs in conjunction with auto financing or car loans and loans for other expensive equipment.
Should the debtor default on their loan, or become behind on their payments, the creditor may legally repossess the vehicle as outlined in the loan agreement. Vehicle repossession can occur until the time at which the final payment is made. An automobile repossession may also occur should the debtor not maintain proper car insurance.
How Can My Vehicle Be Repossessed?
In most cases, the creditor has the legal right to seize a vehicle immediately when the debtor fails to make a payment in accordance with the loan terms. Many states allow repossession to occur at any time of day and at any location. This is the case even if the vehicle is located on private property. It may occur without prior warning to the debtor.
In most cases, vehicle repossession is the only available remedy to a creditor when the debtor defaults on their loan. There may be exceptions depending on the terms of the contract signed between the parties. One exception may include the creditor accepting late payments. In those cases, the creditor could not immediately repossess the vehicle without giving the debtor the opportunity to make the late payment the creditor agreed to accept per the contract.
There may be exceptions to car repossession laws allowing the creditor to repossess the vehicle at any time. The creditor is not permitted to breach the peace in an effort to repossess a vehicle. In most cases, breaching the peace refers to intentionally disrupting the public in a specific way, including:
- Inconveniencing another individual;
- Annoying another individual;
- Alarming another individual; and/or
- Creating a risk in a reckless manner.
A breach of the peace when attempting to repossess a vehicle can include the following actions by the creditor in order to repossess the vehicle:
- Threatening the use of physical force or violence;
- Breaking and entering into the home of the debtor; and/or
- Entering into a closed garage.
Should a creditor breach the peace while repossessing a vehicle, they can be sued. The debtor can collect a penalty fee and compensation for any damage inflicted upon their property. It may also be possible to stop a creditor from repossessing a vehicle by filing a claim of exemption with the court. It is important to remember that creditors do not have a legal obligation to inform the vehicle owner, or debtor, of the intent to repossess the vehicle.
What Happens After Repossession?
After a vehicle has been repossessed, the creditor will generally keep the property or sell in in order to pay off the remaining debt. Each state has different regulations regarding the sale of repossessed property. The debtor may retain some rights to the property even after it has been repossessed, including a right:
- To be notified when and where the property will be sold;
- To be notified what will be done with the property once repossessed;
- To demand the property be sold, even if the creditor wishes to keep it; and/or
- To buy back, or redeem the property prior to a sale by paying the unpaid balance and repossession costs.
If the creditor sells the repossessed vehicle but still does not cover the debt owed, they can sue the debtor for the renaming unpaid amount or deficiency. Many states allow creditors to sue debtors for deficiencies. This can happen so long as the creditor did not breach the peace when repossessing the property and sold the property in a commonly accepted manner without attempting to sell it for an unreasonably low price. Some states forbid this practice, so it is important to review local laws.
It may be possible to obtain government help with repossession. State specific requirements for repossessions may be found by contacting the State Attorney General of your state of the local consumer protection agency. Additionally, a credit counseling organization may help with financial issues.
The Federal Trade Commission (FTC) is the United States’ consumer protection agency. They can provide information and assistance should you be facing the possibility of vehicle repossession and/or repossession of a vehicle.
What Happens if You Hide Your Car from Repo Agents?
It may be tempting to attempt to hide a vehicle to buy time to pay off a creditor and avoid repossession. In most states, doing this will not violate a law on repossessing vehicles unless it is done with intent to defraud the bank. For example, if an individual usually parks their vehicle in a locked garage, they may continue to do so. However, in some jurisdictions, deliberately hiding a vehicle from a repossession company is a crime.
In many states, a vehicle loan creditor is allowed to come onto the property to repossess a vehicle so long as they are not required to cut a chain, lock, or otherwise damage property in the process. If an individual attempts to hide a vehicle by parking it in a garage, behind a house or other place it is not usually kept, the creditor can still repossess it if they can find it. In some states, these actions may be illegal.
If an individual does attempt to make vehicle repossession more difficult, the creditor may be able to obtain the vehicle through replevin. Replevin can be as costly or more costly than the repossession.
In the replevin process, the creditor files a lawsuit seeking a court order requiring the debtor to give the vehicle back. Should the debtor fail to do so, they may be subjected to criminal and civil penalties. The creditor may also be able to obtain a monetary judgment against the debtor, in most cases for the balance owed on the loan or lease plus any costs associated.
Do I Have the Right to Sell My Car, and What Happens if the Sale Does Not Satisfy the Debt?
An individual can sell their vehicle if it is worth more than the amount owed. This could allow the individual to obtain a profit and avoid repossession. This is beneficial because a repossession can remain on someone’s credit report for up to seven years after the original date of delinquency and can have a negative impact on their credit score.
If selling the vehicle does not cover the debt, the remaining balance, or deficiency, is still the responsibility of the debtor. The creditor may be permitted to sue for this balance, as discussed above. It is important to address these issues immediately, because a court judgment against an individual can leave other assets vulnerable to creditors to be used in order to pay the remaining debt.
Do I Need an Attorney for Help with Vehicle Repossession?
Yes, it is important to have a bankruptcy lawyer or an illegal repossession lawyer help with vehicle repossession. As discussed above, there may be available steps to prevent repossession. Additionally, if repossession does occur and debt remains, your other assets may be in jeopardy.
An attorney can speak with the creditor to determine if there is a way to avoid repossession. A creditor has an incentive to allow you to make further payments. They may also be willing to accept a late payment or modify the contract in order to avoid costly court proceedings. An individual can negotiate with their creditor but an attorney will be more knowledgeable in the process and may be able to obtain a more favorable outcome.
An attorney will also be able to review your local laws regarding repossession and rights of the debtor. An attorney will advise you of the best steps to proceed and represent you during any court proceedings, if necessary.
It is possible for a creditor to make a mistake or breach the peace when attempting a vehicle repossession and they may be liable for those actions. An experienced attorney can help when these issues occur and fight for your rights as a debtor.
