In California a car may be repossessed by the creditor if the owner defaults on the loan. In a car loan, the security for the loan is the car itself. A default may occur if the owner of the car has missed one or more payments. The creditor must show that the owner of the car is in default and is responsible for ensuring the car is repossessed legally.
The Automobile Sales Finance Act is the law in California that provides the guidelines to creditors regarding repossession of cars. This law does not require creditors to give notice to the owner before repossessing the car. California cars can be repossessed if the owner is only one day late on his payment. The car owner is allowed to reinstate the car loan by paying the creditor the cost of repossession and storage fees along with all past-due payments. Creditors are required to send the car owner a post-repossession notice that gives the owner information such as the amount of past due payments, where to pay the past due payments and where to go to get the car back.
Breach Of Peace
California law states that creditors must not breach the peace while repossessing a car. Creditors are allowed to remove cars from driveways and parking lots. Examples of breaching the peace includes the removal of cars from a locked garage, entering the car owner's home and damaging the car during repossession. If during a repossession a car owner is forced to pull off the road or threatened with arrest or violence, the creditor has breached the peace.
The creditor may sell the car if the owner cannot afford to reinstate the loan. This is usually done at auction, approximately 15 days after the written notice of sale is given to the owner. Once the car is sold, the creditor applies the sale amount to the balance of the loan. If there is still money owed on the car after the sale, it creates a deficiency balance. The car owner must pay the deficiency balance to the creditor. This may be a substantial amount because cars sold at auction are sold at wholesale prices. If the owner of the car refuses to pay the deficiency balance, the creditor may file a lawsuit to obtain a judgment against the owner. If the court awards the creditor a judgment, the owner may have wages garnished until the deficiency balance is satisfied.