Falling behind on car payments is not only stressful, but also can result in the car getting repossessed. Like other states, Texas has specific statutes governing how secured property can be repossessed. These laws can apply to any car loan situation in the state or any other instance where a creditor gives a debtor a loan and takes an interest in the property.
The right to repossess a car stems from the relationship created whenever parties enter into a security interest. This relationship exists when a creditor (the loan company) gives the debtor (the person buying the car) a loan and takes collateral. Usually, the collateral in a car loan is the car itself. So, if the debtor fails to make payments, the creditor can take the car to satisfy the terms of the loan. In Texas, the security interest against a car (usually in the form of a lien) must be indicated on the back of the title. The car title is needed by the owner if she wishes to operate it, register it, sell it or convey it. Once the security interest is listed on the lien, the security interest is considered "perfected," meaning the creditor can repossess the car if the debtor defaults on the loan.
Personal property subject to a security interest can be repossessed by a creditor or collections agent if the debtor violates or defaults on the terms of the loan or lease. Usually, this happens when the debtor falls behind on the monthly payments. In this case, the creditor can take repossession of the car or any other collateral named as part of the security agreement. The creditor does not have to file a lawsuit or receive the permission of the court to do this, and, as long as the creditor does not violate any laws in recovering the property, it can do so whenever it chooses.
Right to Redeem
If a debtor has her car or property repossessed in Texas, the law allows her to redeem the property. This means that the debtor can take the car back by making a full payment or satisfying the terms of the loan. This can be done anytime before the creditor has disposed of the property. The debtor can be asked to pay any reasonable expenses the creditor may have incurred in repossessing or storing the property, as well as reasonable attorney fees and legal expenses, according to Texas Statutes 9.623.