Car repossession is the most common example of a creditor taking possession of a consumer item purchased on credit. Most people cannot afford to pay cash for expensive items like cars, so they finance the purchase by making a down payment, signing a sales contract and agreeing to make monthly payments towards the loan's principal and interest. In Minnesota, like most states, a creditor can repossess a vehicle when the borrower stops making payments.
The sale of a car is a secured transaction under Minnesota law. It is secured because the car acts as collateral for the loan. The creditor pays the seller in full for the car and the consumer signs a contract with the creditor that grants ownership of the vehicle to the consumer. However, the creditor retains an interest (or lien) on the car. This interest allows the creditor to repossess the car (or collateral) in the event that the consumer violates the contract.
The most common violation is when a consumer defaults on the loan. Default means that the consumer stopps making payments on the loan. The sales contract will usually define what exact behavior constitutes a default. In some cases, default may occur when the consumer misses one single payment or makes a late payment. In Minnesota, unless otherwise agreed to in the contract, once a consumer defaults, the creditor has the right to repossess the vehicle without taking the consumer to court so long as it can do so without breaching the peace. That means a creditor can send a tow truck to take the vehicle from outside the consumer's house so long as the company does it without using violence or the threat of violence.
A consumer in default can redeem the car at any time before the creditor resells it. To redeem the car, the consumer must immediately meet all of his or her obligations per the contract and pay reasonable expenses that the creditor incurred in towing, storing and arranging to sell the car as well as reasonable attorney's fees. In Minnesota, if the consumer paid 60 percent of the car loan off, then the creditor must resell the car by public or private auction. Under Minnesota repossession law, if the creditor does not resell the vehicle by auction within 90 days after repossessing the car, the consumer may recover some damages from the creditor. When the consumer has not paid 60 percent of the loan, then the creditor can just keep the car as satisfaction for what the consumer owes the creditor. However, the creditor must provide written notice to the consumer who then has 21 days to object in writing. If the consumer fails to object in 21 days, then the creditor can keep the car.
Please contact a qualified attorney licensed to practice in Minnesota to determine how Minnesota repossession laws, which are subject to change, apply to the facts of your situation.