The state of Texas allows lenders to repossess vehicles via "self-help" auto repossession, meaning they can hire an unlicensed repo company to tow away a car whose owner, the borrower, is delinquent on car payments. However, this is not an anything goes scenario – Texas repossession laws have specific requirements for creditors regarding how they can take a car. If they don't follow these rules, the borrower can sue to get their car back.
Process for Repossession in Texas
Texas Business and Commerce Code Section 9.609 allows repossession of a vehicle by a lender with a security interest. A vehicle serves as collateral when a borrower secures a loan to purchase it and promises to make payments to pay toward the debt or they lose the car. Texas law states a lender can take a vehicle after one missed payment and repo companies don't need a permit to collect it. Furthermore, they do not have to give the vehicle owner notice.
However, the lender does have certain limits when carrying out a vehicle repossession. It cannot breach the peace, which means a repo agent as hired by the creditor cannot cause a public disturbance when repossessing a car.
Agent Limitations During Repossession
In Texas, an agent for a repossession company cannot:
- Break into a locked property to collect a vehicle.
- Damage someone's property or threaten violence when repossessing a car.
- Trick the owner into taking their car to a shop only to repossess it when they leave.
- Continue the repossession process after the owner verbally protests.
If someone taking a vehicle does threaten violence, the borrower should not respond directly but instead call the police. Violence or threat of it is an example of breaching the peace, and the car's owner may be able to file a wrongful possession claim as a result.
What Agents Can Do During Repossession
Texas law does allow a vehicle repossession to occur in a variety of ways. A "repo man", more properly known as a repossession agency can:
- Take an individual's car from a nonenclosed space.
- Tow their vehicle from a retail parking lot.
- Repossess the car while they are at work.
- Repossess the vehicle when it's parked outside their residence, even if they are at home.
Companies often repossess cars at night or when someone is at work because there is less of a likelihood they will run into the owner. A repo agent does not have to tell the owner when they tow the car, but they must give them written notice when taking it. This must include the location to where they towed it and provide the owner with guidance on getting the vehicle back.
Vehicle Owner Rights During a Repossession
An owner can protest their vehicle's repossession, but they can't hide the car, threaten violence against the repo agent or drag out or stall the processes for repossessing the car. A person who actively prevents the agent from taking the car may find themselves in trouble with the law.
The borrower's personal effects left inside the car at the time of repossession belong to them. The repo company can store such items for the individual until they collect them. If the company refuses to do this, the vehicle owner can contact the lender. If they still can't get their belongings back, they can recover them by filing a complaint in small claims court.
How to Get a Repossessed Car Back
When a repo agent possesses a car, the borrower has options to get it back. They can redeem it by paying the loan balance or reinstate the loan by bringing their payments up to date. They can also negotiate with the creditor to refinance their loan or file for bankruptcy.
Individuals can reinstate their loan only after they catch up with the payments, including the outstanding balance owed, plus late fees. There are also repossession fees to consider, including fees for the repo agents and vehicle storage. To redeem the car, they must pay the balance of the loan all at once within 10 days of repossession or refinance the loan if the lender is willing. If they don't, the lender can sell the vehicle at a public auction.
Public Auctions in Texas
When a person can't pay the fees to reclaim their car, and the lender schedules its sale, they notify the vehicle owner of where and when the sale will occur so that the owner can bid on their car if they wish to do so. The proceeds of the sale cover the lender's repossession costs, with the remaining proceeds going toward the borrower's debt. If the car's sale does not cover the loan as required by the lender, they can sue the borrower for the difference.
The borrower will receive notice of the lawsuit via summons and they must answer it. Ignoring the summons will result in a default judgment against them, and they will be responsible for the remaining fees. A lender who sues a borrower must show accuracy in their claim, according to the Fair Credit Reporting Act; they cannot inflate fees or duplicate them. It is possible for borrowers to settle with lenders before going to court, as it is a costly endeavor for them as well.
Repossession When Filing for Bankruptcy
Bankruptcy can help a borrower keep their car. Once they file for bankruptcy, an automatic stay occurs and stops all collection actions. The borrower can keep their car if they promise to make monthly payments on the loan. However, if they miss payments, the lender can still sue for the balance, and the borrower can lose the vehicle.
In bankruptcy, an individual has time to figure out if they can afford to keep their vehicle. If they pay what they owe in a lump sum while in bankruptcy, they don't have to pay the full amount to the lender – they will only pay the car's fair market value. If they can't afford the car, they can surrender it, which frees them from future debts pertaining to it. Bankruptcy can also clear them of debts associated with the repossession in any judgments the lender obtained against them.
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.