Legal Steps Needed to Repossess a Car
Dude, where's your car? If you're behind on your payments, you may find your car has been repossessed — sometimes, without your knowledge or consent.
What are the legal steps necessary to repossess a car? Repossession laws differ in each state, but here are some general principles on how the process works.
Seizing the Car
In general, a creditor can seize a vehicle as soon as a lessee "defaults" on a payment, according to the Federal Trade Commission. Check your car loan or lease agreement, which should define what a "default" is. Even making a single late payment may be enough, but other loan agreements may include a grace period before they take the car back.
A creditor can legally repossess a car at any time, without notice, no matter where the vehicle is parked (unless it's inside a part of your house, like in a locked or closed garage). But repo men can't use physical force or threats. If they do, it could be considered a "breach of the peace.” Along the same lines, if someone comes to repossess your car you should not try and fight them. Self-help of this kind never works or changes the outcome and can lead to criminal charges.
Selling the Car
In general, a creditor who repossesses a car legally can sell that car to another buyer. Some state laws require a creditor to tell you the date of the auction or impending sale so you can try to buy back the repossessed car.
Other states allow you to try to "reinstate" your loan by fulfilling the full amount of missed payments plus late fees and then entering into a new contract with your creditor. This may be a good option because the fact you failed to make your car payments on time will likely have a negative effect on your credit report for a number of years. That may make it difficult to obtain a loan from a new lender for some time.
Personal Property Inside the Car
In general, a creditor cannot keep or sell personal property found inside a repossessed car. A lawsuit may be warranted if some of your personal items are unaccounted for. If you are not able to retrieve your personal items from the car at the time the repo agent comes to take them you should make an arrangement with the repossession company to come and get them at a later time.
Deficiency Judgments
After a creditor sells a repossessed vehicle, laws may still make you liable for paying the deficiency balance — the difference between what you owe on your loan balance and the resale price of the car.
Creditors can take you to court to enforce a deficiency judgment, but they could be out of luck if you have a good defense — for example, if the repo men breached the peace when repossessing your car, or if a creditor waited too long to sue you. There may also be difficulty collecting if you declare bankruptcy. You may want to consult an attorney to ensure the best possible outcome.
Related Resources:
- Right of Repossession Basics (FindLaw's Learn About the Law)
- How To Get a Repossessed Car Back (FindLaw's Learn About the Law)
- FAQ: How to Pay Off Debt (FindLaw's Learn About the Law)
