All states allow repossession of a vehicle when financing agreements are breached, although the laws about that repossession vary among states and, sometimes, cities. In the state of Alabama, state law controls. The basic repossession laws in Alabama allow a lender with a security interest in the vehicle to repossess it after a single past-due car loan payment. However, this can be overruled by language in the contract. Anyone with a vehicle in Alabama should get an overview of the repossession laws in the state.
What Is Vehicle Repossession?
Car repossession happens when someone with a security interest in the vehicle seizes the car back from the legal owner. Generally, when a person buys a car with financing, they sign a contract giving the lender a security interest in the car. That means that they can seize the vehicle if the borrower fails to live up to the contract.
This kind of default usually happens when the car owner fails to make their periodic loan payment when it becomes due. It can also happen if the owner of the vehicle breaks some other part of the agreement, like the obligation to keep the vehicle insured.
Similarly, when an individual leases a car, the company leasing it to them retains the right to take back the vehicle if the person leasing it defaults on payments or fails to maintain insurance. They also have the right to repossess the car if other terms of the contract are breached. Since vehicle repossession is a matter of contract law, the statute of limitations on vehicle repossession in Alabama is the statute for written contracts, or four years after the breach.
How Does Auto Repossession Work?
In most states, car lenders have the right to seize the motor vehicle when the borrower is in default without giving them any notice. A few states require lenders to give the borrower written notice and a chance to make up for the defaulted car payments.
Alabama falls somewhere between the two categories. Under Alabama law, a finance company is not permitted to initiate any collection attempts, including repossession, until the debtor fails to make a payment when it is due. The lien holder in Alabama generally makes some attempt to get their missed payment, but when that fails, they can exercise their right to seize the vehicle.
Lenders usually do not do the actual seizing themselves, but assign the file to a repossession company. They assist the repossession company by providing all of the information they have about the car owner, including home, school and work addresses. Sometimes the agreement between the lender/lessor and the owner permits them to use the vehicle's electronic locating device to find the car in case of default. When the repossessor finds the car parked in a driveway or on a street, they use a master key or hot-wire the vehicle and drive it away.
Breaching the Peace Not Permitted
Although a repossession company has authority to seize the car in Alabama, they are not permitted to breach the peace in order to do so. Any use of physical force against the car owner constitutes a breach of peace, as do threats to use violence. In fact, if the owner is present and objects, or gets into the vehicle and locks the doors, trying to take it from the owner in such circumstances constitutes a breach of the peace. Likewise, breaking into a locked garage is usually considered a breach of the peace, and entering the debtor's home is against the law.
Note that, in Alabama, the repossession company has the right to go onto the property of the person owing the debt to look for and/or take the vehicle. However, they cannot go through or onto private property owned by anyone who is not the debtor. Alabama law doesn't allow them to enter through a locked gate or to move another vehicle blocking the car to be repossessed. Their right only extends to the vehicle at issue. And deceptive tricks, like asking the borrower to bring the vehicle into a shop for service but in fact repossessing it there, are illegal.
It is not against the law in Alabama to store the car or truck in a locked garage, even if this prevents the repossession of the vehicle. Nor is it against the law to argue with a repossession company who has come to take the vehicle. However, taking measures like deliberately hiding the vehicle to prevent repossession can be a crime in Alabama. And it is not possible in this state to avoid repossession by declaring bankruptcy.
Voluntary vs. Involuntary Repossession
Although most of us think of repossession as a bad thing, some debtors seek voluntary repossession. Those who are very much behind in payments can contact the lender and ask to have the vehicle towed back to the dealership. This is called voluntary repossession and is one way a debtor can avoid both the embarrassment of having the car seized and also avoid paying expensive repossession charges.
However, in Alabama, most repossessions are involuntary. The recovery company either drives the car away or brings a tow truck to the debtor's house and tows the vehicle. Financing companies in Alabama can repossess a vehicle at any point after the account drops into default. Anyone owing money on a vehicle who is not up to date in payments would do well to contact the finance company and set up a repayment plan to avoid having their vehicle repossessed.
Right to Notice and Redemption
Anyone who has had a vehicle repossessed in Alabama has some notice and redemption rights. Under state law, a lender who has repossessed a vehicle is required to mail a notice to the borrower setting out the conditions for retrieving their vehicle. This includes a time frame. A borrower who does not meet the conditions within the time provided in the notice may find that their vehicle has been sold at auction.
What kind of payment can an Alabama financing company require after repossession? The law permits them to mandate full payment of the entire loan amount after repossession for default. It is sometimes possible for a borrower to work out a less stringent repayment plan with the help of an Alabama attorney.
If the borrower is not able to redeem the vehicle, the lender usually sells it at auction. Alabama law requires that the lender use whatever amount the vehicle brings at auction toward repayment of the outstanding loan owed the lender on the vehicle. The lender must inform the borrower of the amount received and the balance still due. Under Alabama repossession laws, the lender who repossessed the vehicle and sold it can collect any remaining difference from the borrower if the auction price was not sufficient to pay off the full balance of the loan.
Right to Retrieve Personal Belongings from the Repossessed Car
Does the owner have the right, in Alabama, to retrieve personal belongings from the vehicle? They do have this right. The repossession company must tell the owner when and where they can retrieve any personal items that were left in the repossessed vehicle. In fact, the repo company can simply remove all personal property from the vehicle and store them.
When the individual calls seeking their personal property, they are given an appointment. They may be required to pay for the cost of storage, if the personal items were stored.
Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.