Most loan contracts allow the car repossession process to get started as soon as the first missed payment. And, most state car repossession laws do not require lenders to give debtors any kind of notice before they repossess a vehicle. Further, car repo laws do not generally provide for courts and law enforcement to be involved while an automobile repossession is actually happening unless there is a breach of the peace during the car repossession procedure.
This means auto repossession laws generally do not require you to be advised when or where the car will be repossessed, and unless you allow for a voluntary repo you’ll just come outside one day and see the vehicle has been taken.
The consequences of repossession can be harsh. But there are things you can do to try and get ahead of the vehicle repossession process whenever possible. Save all messages and document all calls, and always ask they stop calling you. Also, any late payment warnings or notices you receive could violate state or federal collection laws and your auto repossession rights so save all collection letters and repossession notices. If violations of any automobile repossession laws are found you may be entitled to relief.
Phases of Car Repossession
If you are concerned with a vehicle repossession and the car repo process, you likely either:
- still have your vehicle but are expecting repossession soon because you’ve stopped making payments or have fallen behind on payments;
- your vehicle was recently repossessed and you don’t know what to do; or
- your vehicle was previously repossessed and you’re now dealing with the fallout like a deficiency judgment, collections and credit report problems.
Unless you allow for the voluntary repossession of the vehicle, the exact phase of the repossession process that you are in will dictate which repo laws and laws related to repossession apply. Find out if any violations of your basic consumer rights occurred before, during or after the repossession. Any violations in the laws of repossession could entitle you to receive money damages and maybe even help save your vehicle or get it back.
What is repossession?
Repossession of vehicles or vehicle repo is a when a lender exercises the right to take possession of collateral that secures a loan when the loan is in default. For example, if you buy a vehicle on credit then the vehicle purchased serves as collateral for the loan. If you pay your bill on time you keep possession of the vehicle; however, if you fall behind, the law gives the lender the right to repossess.
When you fall behind on payments, the lender generally has two options get the vehicle back: (1) file a civil action in court to get a court order directing the borrower to turn over the vehicle or (2) hire a repo man to just take the vehicle and then collect the repo fees and other expenses back from you.
Lenders generally prefer not to file court actions to gain possession of a vehicle because it requires them to hire an attorney. Almost universally, lenders choose to hound you for the payments and/or hire repo men to take possession of collateral. If you are concerned your vehicle will be repossessed, don’t just sit and wait—get in front of the issue with a no cost case review.
The exact phase of the repossession process that you are in will dictate your possible rights and remedies. Repossessing a car legally can be tricky business, and if a breach of the peace or any violations of your basic consumer rights occurred before, during or after the repossession of vehicle you may be entitled to receive money damages and maybe even help save your vehicle or get it back.
When is a car payment in default?
Typically, missing the payment due date by even one day makes the account delinquent and in default. Once in loan default you are generally in danger of repossession, including if it’s the very first time you are late.
Fortunately, car repossession laws require the loan contract to disclose the lender’s repossession policy, including when they can repossess and your redemption rights if a repossession occurs. So if you are expecting repossession, it is a good idea to read the fine print in your credit contract to see the lender’s right to repossess your car. Some creditors allow grace periods, but these are not always true grace periods, and if a creditor does agree to accept a late payment or to change your payment date make sure to get it in writing! And if you are concerned about a potential repo you may want to consult a consumer protection attorney to evaluate your rights under repo laws and other must know consumer statutes. Representation may be inexpensive or even no cost and could help save your vehicle or get it back.
When you purchase any vehicle on credit the lender retains important rights in the vehicle until you make the final payment. These rights are established by the contract you signed and by state law. Failure to make the first, second or even last payment on time carries serious consequences because your creditor has the right to “repossess” – take back – your car without going to court, or without warning you in advance. If you return the vehicle to the lender before the repo man takes it, it is considered a voluntary repossession of a car or a voluntary surrender.
Giving the vehicle back to your lender voluntarily, or voluntary car repossession, may reduce your creditor’s expenses in repossessing the automobile and it may reduce the amount you will owe the creditor, including repossession fees and other expenses within the repossession fee schedule. BUT, even with a voluntary vehicle repossession you will still be responsible for paying any deficiency on your loan, and the creditor may still report the voluntary auto repossession on your credit report.
If you are considering voluntary repossession, talk to a debt help lawyer about the auto repo laws. Many vehicle repossession laws place limits on how the creditor may repossess the vehicle and provide the lender must try sell the vehicle promptly in order to reduce or eliminate your debt. And although the Federal Fair Debt Collection Practices Act (FDCPA) generally does not apply to creditors (your auto lender), many states have specific repossession laws (usually referenced in the credit contract) and/or state fair debt collection laws that do cover repossessions. Further, Truth in Lending Act violations can provide offsets or deductions and reduce the deficiency balance you owe, and incorrect credit reporting can also help you leverage the consequences of a repossession.
What happens when your car is repossessed?
Your creditor, lender or lessor obtains important rights against you when you finance or lease a vehicle. These rights and duties are established by the contract you signed and your state’s laws. Your creditor usually has legal authority to seize your car as soon as you default on your loan.
Once you are in default your creditor may repossess your car at any hour of the day or night without prior notice. Once the vehicle is repossessed it’s extremely difficult to get back, and expensive as well. Generally you’ll have to pay all overdue payments and any penalties plus the cost of the repossession and any storage charges incurred as a result of the repo.
In a typical repossession, what happens when they repo your car is the repo man (the person who repo vehicles) will come to your home (generally in the middle of the night when he expects you to be sleeping), attaches your vehicle to a tow truck, and tows it away as quickly and quietly as possible. Sometimes a repo man will have a key to the vehicle. In these situations, he’ll just get in the vehicle and drive it off.
Sometimes a repo man can’t get to your vehicle (because it is locked inside a garage or another secured area). In this instance, the repo man will stake out your home and wait for you to go somewhere. When you leave, he will follow you and repossess your vehicle after you park it.
In other instances, a creditor may require a GPS starter interrupt device to be installed in a vehicle as a condition to credit. If one of these devices is installed in a vehicle and the consumer falls behind on his payments, the device stops the vehicle from starting and notifies repo man of the vehicle’s location. Depending on the loan contract and your state’s laws such electronic disabling devices may be considered equivalent to a repossession or a breach of the peace which could affect your rights. Such devices can also violate TILA when inadequately disclosed.
But repossession isn’t a one-way street and there are legal limits on the right to repossess. For example, the creditor may not come onto your property or otherwise commit a “breach of the peace” during the repossession by using physical force or threats of force or breaking into locked buildings. If a “breach of the peace” occurs, your creditor may be required to pay a penalty or compensate you for any harm done to you or your property. Further, a breach of the peace during the repossession process may make the repo invalid and maybe even save your car! Plus, you may be entitled to money damages.
What if the repo man breaches the peace?
Most consumers find repossession to be an unpleasant and terrifying process. The reason why is obvious: A stranger comes onto your property and takes one of the most expensive items you own. Moreover, given that repossession is essentially legally sanctioned theft, the repossession industry tends to attract hard-hearted “tough guys” that, like bounty hunters and debt collectors, tend to be possessed of a certain cavalier attitude. Add to this that repo men generally make several hundred dollars for a successful repossession, and the stage is set for real trouble. But you have repossession rights too.
Although the laws of most states permit repossession, without notice, and at any time after default, there cannot be a breach of the peace during the process. What exactly constitutes a “breach of the peace” varies from place to place, and depends on the facts.
Still, a breach of the peace is generally understood as a loud and rowdy confrontation that disturbs the public or creates a genuine risk of violence. In most places, a repo man’s actual violence or threat of violence will constitute a breach of the peace, as will breaking and entering (cutting the lock off of a gate/picking the lock on a garage) constitutes a breach of the peace.
Similarly, in many places, a consumer’s unequivocal protest of a repossession (“Stop you can’t take the car,” or “I protest this repossession and demand you stop immediately.”) requires the repo man to stop the repossession and forces the creditor to go to court to get an order to repossess the vehicle. If the repossession continues over the protest of the consumer, a breach of peace may be found and the consumer may be entitled to money damages.
Also, a repo man is generally not allowed to enlist the help of law enforcement officers to accomplish a repossession and the presence of a law enforcement officer at a repossession itself creates a breach of peace. In other places, a law enforcement officer must actively facilitate a repossession before the officer’s presence can create a breach of peace.
If a repo man breaches the peace to repossess a vehicle, the breach may subject the repo man and the creditor that hired him to liability and money damages to the consumer. Moreover, if a law enforcement officer facilitates a repossession, he may expose himself and the government body he works for to liability.
Should I get a written notice or letter after I’m repossessed?
Lenders under most state laws have to provide certain post repossession notices regarding the repossession, and to do so within a short time after it occurs (usually five days after the repossession, and usually at least ten days before disposing of the vehicle through sale or auction). This is generally referred to as a “Notice of Default and Right of Redemption/Right of Reinstatement” and must state:
- the amount of the outstanding balance of the loan, including all fees and charges
- the deadline to redeem the loan
- the method by which you can redeem or payoff the loan to get the vehicle back, and
- if your state allows for the right of reinstatement, the amount necessary to bring the loan current and the steps you need to take to reinstate that loan.
This notice is usually combined with the required “Notice of Sale” which must usually contain the following information:
- if the car is being sold at a private sale, the date of the intended sale
- if the lender intends to sell the car at a public auction, it must notify you of the time, date and location of the auction (this gives you the opportunity to bid on the property or bring your own bidders)
- an explanation of your liability if you owe a deficiency balance after the sale
- a description of how you can obtain an explanation of how the proceeds of the sale are applied to your debt obligation
- a description of how you can obtain an explanation of how the lender calculated your debt obligation, and
- contact information to find out more information about the upcoming sale.
SAVE THIS NOTICE as any missing or incorrect information on it may benefit you.
What are the options for getting repossessed vehicles back?
In certain stats you may reinstate the loan to get the vehicle back by curing all arrears and by paying the repossession costs. You must continue to make regular payments on the loan after you reinstate.
You can generally also redeem (i.e., buy back) the vehicle by paying the lender the remaining loan balance in full, plus all arrears and repossession costs.. In addition, you may be able to reinstate your loan by paying the amount you are behind on the loan plus your creditor’s expenses. This is obviously not an option for most people.
Finally, you may be able to buy it back at the auction. Your lender may sell the vehicle at auction, and you can bid on the vehicle to try to buy it back. However, you will still remain liable for any resulting deficiency balance as this would be a new and separate purchase.
What if the lender resells the vehicle?
After repossessing your car, the creditor can keep the car as compensation for your debt or resell it in a public or private sale. In either case, you must be told what will happen to the car. If the creditor decides to keep the car, in most states you have the right to demand they sell the car instead. And you’ll want to exercise this right if the car is worth more than the amount owed on the loan, as a repossessed car sold for more than owed means money back to you.
If the car is sold, the lender must provide you with an accounting of how the proceeds of the sale were applied against your debt. Most states allow the lender to apply the sale proceeds to reasonable costs and expenses of repossessing, storing, and disposing of the vehicle, along with reasonable attorney fees (if the loan agreement allows them) first, and then to the balance of the loan. The creditor must notify you of the amount of that deficiency and if the balance not satisfied and fully paid off after sale you’ll be responsible.
If the car is sold at a public auction, you generally must be notified of the date in advance.
If sold at a private sale, you will be notified of a date after which it will be sold. Any resale must be conducted in a “commercially reasonable manner.” For example, a resale price which is below fair market value may be unreasonable. If this occurs, you may have a claim against the creditor for damages, or a defense against a deficiency judgment.
SAVE THIS NOTICE as any missing or incorrect information on it may benefit you.
What is a deficiency balance or deficiency judgment?
Because vehicles are typically worth much less than what is owed on loan contract, most repossessions end with the debtor owing what is called a deficiency balance. The deficiency will be sought from and against you and you can expect to be collected on or even sued. You can also expect your credit report to reflect the repo and for your credit score to drop, which may make it hard to get another vehicle or loan, or even a job!
A deficiency judgment is the difference between what you owe on your loan and what your creditor receives from selling the vehicle, as determined by a court. Creditors who follow the proper procedures for repossession and sale are generally allowed to sue you for a deficiency judgment to collect the loan balance. However, if a “breach of the peace,” was committed, the creditor may lose the right to collect a deficiency judgment. If you are sued, DO NOT miss the court hearing date because it may be your only opportunity to defend your position and to get the amount owed reduced or eliminated.
What happens to personal property left in the vehicle?
Many consumers keep items in their vehicles that have monetary or sentimental value. Generally, a creditor may not keep or sell any personal property found inside a repossessed vehicle. In some states, the creditor must tell you what personal items were found in your car and how you can retrieve them. The creditor may also be required to use reasonable care to prevent anyone else from removing your personal property from the car. Repo men are not supposed to keep the personal property found in repossessed vehicles, but it is common for them to steal these items or throw them away. If your creditor can’t account for items left in your vehicle, you may be entitled to compensation. Personal property does not apply to improvements made to the car, such as a CD player, stereo or luggage rack.