Vehicle Repossession

Chances are you rely on your vehicle to get you where you need to go — and when you need to go — whether it’s to work, school, the grocery store, or the soccer field. But if you’re late with your car payments, or  if you don’t have adequate auto insurance, your vehicle could be taken away from you.

When you finance or lease a vehicle, your creditor or lessor (often the selling dealer) has important rights in the vehicle (that end once you’ve paid off your loan or lease obligation). These rights in the Vehicle are established by the contract. For example, if you don’t make timely payments on the vehicle’s loan “default”, your creditor may and typically does have the right to “repossess” — ­or take back your car without going to court or warning you in advance. Your creditor also may be able to sell your contract to a third party (typically a bank or finance company), called an assignee, who may have the same right to seize the car as the original creditor or dealer.

The creditor’s rights may be limited. There are laws in place that dictate  how your creditor may repossess the vehicle and resell it. Creditors that violate any rules may lose other rights against you, or have to pay you damages.  There are many things that typical consumers are not aware of when in comes to vehicle repossession.  This firm is here to help!

 

What constitutes a “Default” on my loan agreement?

What constitutes default will be stated in your contract, but failure to make a payment on time would certainly be an example. However, if your creditor has agreed to accept your late payments or to change your payment date, the terms of your original contract may no longer apply. Such a change in your credit contract may be made orally, in writing, or, sometimes, simply by your creditor’s repeated acceptance of late payments without complaint. 

The Repossession of the Vehicle.

Once you are in default, the laws of most states permit the creditor to repossess your car at any hour of the day or night, without prior notice, and to come onto your property to do so. 

However, your creditor’s right to repossess your car or truck is subject to some restrictions.  In order for your creditor to take your property without going to court REQUIRES them to strictly follow the law allowing for their ability of “self-help” repossessions.

When seizing the vehicle, your creditor may not commit a “breach of the peace” by, for example, using physical force or threats of force. Taking your car over your protest or removing it from a closed garage without your permission also may constitute a breach of the peace. Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or, if any harm is done to you or your property, to compensate you. Also, because of a breach of peace, your creditor may lose the right to collect a “deficiency judgment.” A deficiency judgment is the difference between what you owe on your loan and what your creditor receives when reselling your vehicle.

Selling the Vehicle after Repossession.

After repossession your vehicle may be sold and this can happen quickly so you will need to act fast after the repossession.  However, before your vehicle can be sold the law requires that you be given specific notice of the creditor’s sale of the vehicle and what will happen to your loan balance after the creditor’s sale. 

Once your vehicle has been repossessed, your creditor may decide to either keep it as compensation for your debt or resell it. The law requires your creditor to let you know what will happen to the car in the form of a specific written notice. Notifying you how the vehicle will be sold, when and where the vehicle will be sold.

In any of these circumstances, you may be entitled to “redeem” — or buy back — the vehicle by paying the full amount you owe (usually, that includes your past due payments and the entire remaining debt), in addition to the expenses connected with the repossession, like storage, preparation for sale, and attorney fees.

Any resale of a repossessed vehicle must be conducted in a “commercially reasonable manner.”  “A creditor’s failure to resell your car in a commercially reasonable manner may give you a claim against that creditor for damages or a defense against a deficiency judgment.

Personal Property in the Vehicle

Regardless of the method used to dispose of a repossessed car, a creditor may not keep or sell any personal property found inside.

Paying the Deficiency

Any difference between what you owe on your contract (plus certain expenses) and what your creditor gets for reselling the vehicle is called a “deficiency.” For example, if you owe $15,000 on the car and your creditor sells it for $10,000, the deficiency is $5,000 plus any other fees you owe under the contract. Those might include fees related to the repossession and early termination of your lease or early payoff of your financing. Your creditor is allowed to sue you for a deficiency judgment to collect the remaining amount owed as long as it followed the proper procedures for repossession and sale. Similarly, your creditor must pay you if there are surplus funds after the sale proceeds are applied to the outstanding contract obligation and related expenses, but this situation is less common.

You may and often can have a legal defense against a deficiency judgment.  If you are being sued to collect on a deficiency action call the Firm.

Is the Repossession is Wrongful?

If any of the laws governing the repossession and sale of your vehicle are violated, your creditor may lose other rights against you, or even be required to pay you damages. Contact the firm today for a free consultation on your specific case and repossession issue!