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    What The Government Says About Car Repossession

    Car Repossession

    A vehicle is often an essential part of life, be it for work or leisure. However, if you default on payments, you may have yours taken away. Your creditor rights might be limited when you fail to pay for your vehicle. In this article, we’ll examine what's involved with car repossession laws.

    If Your Car Is Seized

    Your vehicle can be seized from you in certain states the moment you default on an auto loan or lease. Check your vehicle contract to ascertain what’s defined as a default on payments. Not paying on time is often reason enough. Though, changing a payment date may invalidate the original terms of a contract. These changes should always be in writing.

    Once you’ve defaulted, a vehicle can often be taken without any notice. Car repossession rules state that creditors are permitted to enter a property, though it’s an offense to commit a “breach of the peace”. This can be defined as physical force or the threat of removing a vehicle from a closed space without permission.

    Any breach of peace could see the creditor compelled to compensate you, especially if the damage is done to the property. Such a breach will also help you in any legal defenses if you’re sued for the difference between repayments owed and the resale value of the car. This is referred to as a “deficiency judgment”.

    If Your Car Is Repossessed And Sold

    A creditor that’s seized a vehicle may retain it or resell it to recoup funds. In many states, the creditor must inform you of their intentions after a car repo. If a car is listed at a public auction, the creditor needs to tell you the details as you may wish to bid. If a sale is organized privately, then you can demand to know the date.

    Whatever the method, there may be an opportunity to buy back a car by paying everything owed, which includes past and future payments. Additional charges may be added for costs incurred like storage, attorney fees, and paperwork. It may be cheaper to bid at a vehicle repossession sale. Any creditor sale must be done reasonably, though, they’re not compelled to sell for a high or even good price.

    Consumer laws in some states permit you to reinstate a loan, which involves getting your car back by paying what’s due, plus expenses. Future payments must be on time to avoid a repeat situation.

    Personal Property

    Irrespective of the circumstances of vehicle repossession, all items within the vehicle legally belong to the original car owner. The creditor isn’t permitted to retain any items found within a vehicle after a car repo, nor may they sell those items. 

    Some states in America require a creditor to inform you of any personal items found in the vehicle. They must also provide clear instructions for how any items can be retrieved, though they don’t have to personally return them.

    Additionally, a creditor may be responsible for another individual taking items from a vehicle. The creditor has a duty of “reasonable care”. You need to contact an attorney immediately if a creditor is incapable of returning personal items you knew were in the vehicle at the time it was taken from you. You should be able to rightfully claim compensation equal to the value of the items.

    The Deficiency

    A deficiency is defined as the difference between what your creditor sells your vehicle for and what you owed on the vehicle contract (plus specific expenses). An example: You owe $5,000 on a vehicle that a creditor resells for $3,000. The deficiency is $2,000, plus expenses. They may include costs imposed for the repossession, early lease termination, and storage.

    In most US states, the creditor can sue for a deficiency judgment to recoup the money. This is dependent on correct procedures being followed at the time of the vehicle repossession. If not, you can submit a legal defense against the deficiency. You can also do so if the car wasn’t sold reasonably or if there’s a time bar on taking action. A creditor must pay you if a vehicle sale results in surplus funds, but this isn’t common.

    Installing An Electronic Disabling Device

    Some creditors insist on you installing an electronic disabling device before they’re prepared to consider you for finance. These devices stop a vehicle from starting should payments not be made as agreed. Because it prevents the use of the car, many consider it similar to a repossession or a breach of the peace. 

    However, that depends on your state’s laws and the terms of the contract with the lender. If you have questions about the use of these devices, seek advice from an attorney or state consumer protection agency.

    Read more:

    3 Best Reasons For Refinancing Your Car Loan

    How To Spot Auto Loan Modification Scams?

    Bottom Line

    A creditor may seize a vehicle as soon as a payment is missed, with little or no notice. There may be an opportunity to buy it back, but that’ll come with extra costs. 

    It’s better to never have your car seized. Thus, if you think you may miss a payment, contact your creditor immediately and attempt to resolve the situation. Be sure to get any agreement in writing. 

    If you agree to a “voluntary” repossession, that may lower expenses, but note you may still have to pay for any deficiency on the contract. If you’re struggling with debt, you can also contact an attorney for advice.