When you finance a vehicle, until you make the last payment or pay off the vehicle, the creditor keeps important rights to the vehicle, such as the right to repossession. The rights of each party are governed by the signed contract of sale and state law. Under Missouri law , Title 26, Chapter 400, Article 9 governs vehicle repossession.
In Missouri, your creditor may legally seize your car once you default on the car loan. Creditors can repossess through a judicial or non-judicial process. That means the creditor can file suit against you in court (judicial process) or can simply seize your car with a tow truck (non-judicial). If creditors choose the non-judicial process, under Missouri law § 400.9-609, they must not "breach the peace." That generally means the creditor must give you notice that you are in default, demand payment, give you notice that the sales contract or lease is terminated, and then give you notice that the creditor intends to take repossession. In addition, if a creditor chooses to non-judicially repossess your vehicle, the creditor must do so without disturbing public order.
Once the creditor has seized your vehicle, it can be sold in a public or private auction. Missouri law § 400.9-610 requires that all aspects of the sale must be "commercially reasonable." In other words, the creditor should sell the vehicle for fair market value. The law does not require that "commercially reasonable" be exactly fair but market value, but if you owe $15,000 on your car note then your creditor should not sell it for $500.
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Once the creditor sells the vehicle, you may be liable for the difference between the sales price and the money owed on your car note. For example, if you owed $15,000 on your car note and the creditor sells the car for $11,000, you still owe the creditor $4,000 plus any fees and costs stated in the sale contract. That amount is called a "deficiency." A creditor can go to court and seek a judgment against you to recover the deficiency. A creditor, however, has the burden in court to show that the vehicle was disposed of in a commercially reasonable manner.
This article is intended to give a basic overview of Missouri repossession laws, which are subject to change. It is not intended to give legal advice. To determine how the facts of your situation apply to Missouri law, consult a qualified attorney licensed to practice law in the state of Missouri.
An attorney and founder of ScrofanoLaw, a general practice law firm in Washington, D.C., Joseph Scrofano has been writing on legal issues since 2008. He holds a Juris Doctor from the Washington College of Law, a Bachelor of Arts with special honors from the University of Texas and a master's degree in international affairs from American University's School of International Service.