If you are a fan of “trueTV” (like me), you probably have seen a variety of people behaving badly during a vehicle repossession. Although they are very entertaining and quite humorous, vehicle repossession is serious business, and you need to understand a few things. First of all, if the repo man is at your door, arguing is pointless, the repossession order has been signed even before he got to your location, arguing will do you no good. Just let them do their job and take the car! You do not want to make yourself look bad in public. So here is how it should go down:
Chapter 1. Seizing the Vehicle
In many states, your creditor can seize your vehicle as soon as you default on your loan or lease. Your contract should state what constitutes a default, but failure to make a payment on time is a typical example.
However, if your creditor agrees to change your payment date, the terms of your original contract may not apply any longer. If your creditor agrees to such a change, make sure you have it in writing. Oral agreements are difficult to prove.
Once you are in default, the laws of most states permit the creditor to repossess your car at any time, without notice, and to come onto your property to do so. But when seizing the vehicle, your creditor may not commit a “breach of the peace.” In some states, that means using physical force, threats of force, or even removing your car from a closed garage without your permission.
Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or to compensate you if any harm is done to you or your property. A breach of peace also may give you a legal defense if your creditor sues you to collect a “deficiency judgment” — that is, the difference between what you owe on the contract (plus repossession and sale expenses) and what your creditor gets from the resale of your vehicle.
Chapter 2. Selling the Vehicle
Once your vehicle has been repossessed, your creditor may decide to either keep it as compensation for your debt or resell it in a public or private sale. In some states, your creditor must let you know what will happen to the car. For example, if the car will be sold at public auction, state law may require that the creditor tell you the time and place of the sale so that you can attend and participate in the bidding. If the vehicle will be sold privately, you may have a right to know the date of the sale.
Chapter 3. 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. In some states, your creditor must tell you what personal items were found in your car and how you can retrieve them. If your creditor can’t account for articles left in your vehicle, you may want to speak to an attorney about your right to compensation.
Chapter 4. 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 $10,000 on the car and your creditor sells it for $7,500, the deficiency is $2,500 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. In most states, 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 have a legal defense against a deficiency judgment if, for example, your creditor breached the peace when seizing the vehicle, failed to sell the car in a commercially reasonable manner, or waited too long before suing you. An attorney will be able to tell you whether you have grounds to contest a deficiency judgment.
Chapter 5. Electronic Disabling Devices
Some creditors might not provide you with financing unless you agree to the installation of an electronic device that prevents your car from starting if you do not make your payments on time. Depending on your contract with the lender and your state’s laws, using that sort of device may be considered the same as a repossession or a breach of the peace. How your state treats the use of these devices could affect your rights. Contact your state consumer protection agency or your states Attorney General if you have questions about the use of these devices in your state.
Chapter 6. Talking with Your Creditor or Lessor
It’s easier to try to prevent a vehicle repossession from taking place than to dispute it after the fact. Contact your creditor as soon as you realize you will be late with a payment. Many creditors work with consumers they believe will be able to pay soon, even if slightly late. You may be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.
Chapter 7. A Final Word
Never buy a car just because it makes you look “cool” or because “the chicks will dig it.” Trust me; women appreciate people who can actually afford what they have! It’s very unattractive to have the repo man ruin your romantic date. Buy cars that make sense for you and your budget. And if you ever do get behind on the payments, communication with the finance company is key! And now that you know the ins & outs of vehicle repossession, happy riding!