Personal Finance and Money Management

Automobile Repossession

When you finance or lease a car, truck, boat or other vehicle, the loan is normally secured against the carriage itself. This means that your creditor or lessor holds characteristic rights to your vehicle until you’ve completed all loan payments or fulfilled your leasing obligation; and, should you default on the loan, the lender has the right to repossess the vehicle. In fact, even one late payment may provide creditors the opportunity to legally repossess your car, so it is important to be aware of contents of your specific contract and state law governing repossession.

Imagine being out on a hot date, returning to the parking lot after that romantic movie and finding your car has been removed “on the sly” by the repo man. If you have defaulted on your contract in any way, your creditor or lessor may have the right to repossess your vehicle. In frequent states, they can do this legally with no advance warning, and no court action. They must, however, do this without “breaching the peace”. It is worth emphasizing again the importance of reading your contract and understanding the sort of constitutes “default” in your individual situation. The loan contract must disclose the lender’s repossession policy and what your rights are if repossession occurs. If the state has specific repo laws (CLICK HERE for a Table summarizing these), they usually will be referenced in the epitomize as well.

If Default Seems the Only Option…

Many of us are faced with temporary challenges such as medical bills or unemployment, and need to find an interim solution. Obviously, it is smarter to try to prevent a vehicle repossession than to dispute it afterward. Contact the creditor and attempt to bargain a grace period or revised payment schedule; if successful, be sure to obtain agreement in writing.

If the creditor or lessor refuses to suffer any leniency and repossession is eminent, you may decide that “voluntary” repossession is an option for your situation. Giving the vehicle back voluntarily may reduce your creditors expenses for repossession fees; however, you power of choosing still be responsible for paying any deficiency on your credit or lease contract, and there is no guarantee that the late payments and/or repossession will not end up on your credit report.

The Repossession Process

A typical vehicle repossession might work one’s way through the following steps.

You are notified in writing by your creditor or lessor that your payment is late (not necessarily required, however; proportion on your specific incur). You may receive a second notice/warning and/or a telephone call warning of your overdue payment A grace period may pass (length as stated in your contract) A second warning may be provided both by phone or mail; Your car is repossessed in unit of several methods. You receive notice of repossession (in case you didn’t know?) and some explanation of your rights and the process for exercising them; You decide whether to pay the exorbitant fees or allow the creditor to sell it at auction for perhaps a fraction of it’s worth; possibly leaving you with a balance still due, or deficiency judgment

After Repossession: What to Be Aware of

If you default on your loan, the law in most states allows the creditor or lessor to repossess your car; however, some state laws place specific limitations on the ways a creditor or lessor can repossess and/or sell your vehicle to pay off your debt. Research your specific state laws; if any rules are violated, you may be entitled to damages from the creditor or lessor! For instance, some states require creditors or lessors to inform you in advance if they plan to be initiated your property to seize your car. If a “breach of peace” occurs (a public scene, harm to person or property, perhaps even removing your vehicle from an enclosed garage) you may be entitled to compensation.

Once your car has been repossessed, it will most likely be sold in a of the whole not private or private auction to cover the debt partially or in full. State laws typically provide more requirement that the sale of the repossessed vehicle be conducted in a “commercially reasonable manner”. Generally, the expectation is that the sale excellence obtained is fair for the established market for the vehicle (but the expectation is on the low end), and the mode of selling the car was conducted in a commercially reasonable manner according to standard practice for the appropriate market. Thus, contingent on your individual state law, failure to sell your vehicle in a commercially reasonable manner and win a fair and honest market price, may provide means for a claim or dispute against your credtor for damages.

Some state laws require that the creditor or lessor must inform you what will happen to your car; if it is to be sold at public or private auction for instance, inform you of the date of sale and allow you the right to participate and/or buy back the vehicle (inclusive of additional fees you may owe due to the repossession performance). If the creditor or lessor does not inform you of this information, and your grandeur law dictates this, you may be able to recover damages as well.

Personal property left in your vehicle is typically not considered the quality of the creditor or lessor post-repossession; and in fact, they are typically required to ensure that others cannot damage or remove items left behind. Depending on your state laws, you may have a right to compensation for any missing articles of personal property resulting from the repo process. Personal property constitutes “freestanding” items that are left in the car which are not improvements or physical attachments to the car (like a built-in gps or dvd player).

If You End up With a Deficiency.. Can you Dispute this?

It’s not over yet. Your car was repossessed while you were enjoying your popcorn with that cool guy or gal you just met, sold for pennies on the dollar and now you are in front of a judge being sued for the outstanding balance. How did this happen? Sometimes when your car is repossessed the original creditor sells the car for less than the amount remaining on your loan. When this happens they be able to come after you for the balance, called the deficiency. This Sample Letter is for the purpose of disputing collection activities on a deficiency from a motor vehicle repossession. It may be used AFTER 2 years from the date of the repo sale, providing there has been no filed claim for a judgment. It should not be used if you have been sued, or if the repossession is less than 2 years ago.

Depending forward your individual state’s law, in the event of a suit for a deficiency judgment, you should be notified of the date of the court hearing. It is during this process that you would provide and utilize any grounds for disputing the judgement; such as any failure to follow the protocols we have discussed earlier (again, each state is different so you will need to do your homework).

How about auto leases? Read our article on auto leasing.

Want to research state laws for secured transactions? (CLICK HERE)

Similar Posts:

• What Happens if my House Goes Into Foreclosure?
• Sample Letter to Creditor
• Bad Credit Auto Refinancing Loans
• How to Buy a Foreclosed Home
• Auctioning of Hialeah Foreclosure Homes