Table of Contents:
- What Are the Repossession Laws in Alabama?
- Oregon Repossession Laws
- Repossession Laws in Virginia
- Repossession Laws in Minnesota
- Repossession Laws in North Carolina
Most of us have at one time or another been late on a payment or two. If late payments have caused you to face the possibility of having your car repossessed, knowing your options is important. The state of Alabama has certain laws that are designed to protect the rights of consumers in regards to vehicle repossession. Banks and repossession companies must comply with these laws or face tough financial penalties or other legal ramifications.
Terms of Contract
According to Alabama law, even if the debtor is only one day late, the bank or lending institution that holds a lien on the vehicle has the right to repossess. The bank or lending institution does not have to provide you with any sort of extra time to make your payment before repossession. If, however, your purchase contract has a grace period built into the terms of the payment structure, the bank or lending institution may not repossess the vehicle until you are at least one day past the grace period specified in your contract.
Under Alabama law, the bank or lending institution or any agency acting on its behalf must not violate the law in order to repossess the vehicle. The bank, lending institution or professional repossessor must not violate the peace in any way. He or she can not use violence or the threat of violence in order to repossess the vehicle. Additionally, the repossessor and lending institution must act truthfully. He or she may not lie to you by advising you to bring your car in for repairs or the like in order to trick you to gain access to the vehicle for repossession. All transactions must be done in accordance with the law. If a bank, lending institution or anyone acting on their behalf violate any of the mentioned terms, the bank may be ordered to pay restitution to the debtor or forfeit any rights to reimbursement for profits lost due to costs incurred.
If a vehicle is repossessed with personal items belonging to the debtor inside, the items must be returned as soon as reasonably possible. Valuables such as money, jewelry and the like that may have been left in the vehicle are not subject to sale in order to recover any costs incurred by the bank or lending institution for money owed. Sale of these items would constitute theft and the bank, lending institution or anyone acting on its behalf would be subject to criminal punishment according to Alabama state law.
Right To Redeem
The debtor must be notified of his or her right to redeem the vehicle. The right to redeem means that the debtor has the right to pay the amount due in order to retrieve the vehicle and prevent it from being sold. If the bank or lending institution fails to notify the debtor in writing of his or her rights to redeem the vehicle and the amount due in order to do so, the creditor is in violation of the law and is subject to fine. If the debtor chooses not to redeem the vehicle, any profit that is made upon the sale of the vehicle, less any balance due and costs incurred, must be paid to the debtor. If the bank or lending institution sells the car for less than was owed, the creditor is then responsible for the balance due.
A creditor agrees to lend a consumer money to finance a large purchase in exchange for the consumer agreeing to make payments to the creditor until the consumer pays the loan in full. In addition, the creditor charges interest. Until the consumer pays off the loan, the creditor can repossess the item if the consumer goes into default. Default means the consumer stopped making payments, made a late payment or otherwise violated the sales contract.
The sales contract governs the specific terms of the agreement. For instance, the sales contract sets out the interest rate for the loan, the number of payments to be made and the total amount of the loan. The sales contract typically has other requirements, such as providing that the consumer must keep the car insured at all times.
The consumer usually holds title for the item. However, the creditor must have its secured interest on the item noted on the title. To do so, the creditor must apply to the Oregon Department of Motor Vehicles. If the creditor does not have its secured interest noted in the item’s title, it cannot repossess without getting a court order. This process is commonly called “perfecting.”
If the creditor has perfected its security interest and the consumer goes into default, Oregon repossession laws permit the creditor to use “self-help repossession.” Self-help repossession involves, for example, the creditor sending a tow truck to pick up a car right in front of the defaulted consumer’s home. The only limitation on self-help repossession is that it must be done without breaching the peace, which means without the use of violence or the threat of violence.
Once a creditor repossesses an item, it can auction the item off at a public or private sale. The sale must be reasonable in its time, place and manner. Basically, reasonableness means a creditor cannot sell a $20,000 car for a much smaller amount, such as $1,000.
If the creditor does not recover the balance of the defaulted loan as well as all of the reasonable costs it incurred because of the repossession, the creditor can go after the consumer for the difference. For example, if a consumer defaulted on a car with $10,000 left on the loan, the creditor repossessed and resold for $8,000 but incurred $2,000 in towing, storage and attorney fees, the consumer might be liable for a $4,000 deficiency.
The laws of the commonwealth of Virginia establish certain procedures through which a lender is able to repossess a vehicle when the underlying loan is in default. Laws in Virginia permit both a private (peaceful) repossession as well as judicial repossession as necessary. Before pursuing a repossession in Virginia, a lender must understand the basic elements of applicable Virginia law.
Repossession laws in Virginia permit a private party or business to take physical possession of a vehicle when the loan on it is in arrears, provided the taking is done peacefully. If the titleholder to the vehicle is present and objects to the repossession in a manner that breaches the peace, the individual attempting to repossess must withdraw and pursue an alternative to take the vehicle at another time. Provided the repossession proceeds peacefully, a court order and judicial intervention is not necessary.
Virginia law encourages voluntary repossession. A voluntary repossession occurs when the lender contacts the titleholder and requests that she surrender the vehicle. Typically, the lender relieves the titleholder of any further liability for the loan, even if the loan is greater than the actual value of the vehicle.
If a lender determines peaceful repossession is impossible, Virginia law requires a court order and the involvement of law enforcement to obtain the vehicle. The lender must file a lawsuit in the commonwealth court where the vehicle is presumed located.
The lawsuit contains three elements. First, the lender requests that the court issue an order affirming that the lender is entitled to repossess the vehicle because of the delinquent loan. Second, a companion order directs the sheriff's office to assist in obtaining the vehicle. Each county sheriff's department maintains a civil division or officer assigned to these types of tasks. Finally, a lawsuit includes a request that the lender be awarded a deficiency judgment if necessary.
In some repossession cases, the value of the vehicle is below the outstanding balance on the loan. A lender is entitled to what in Virginia is known as a deficiency judgment. A deficiency judgment is an order from the court requiring the owner of the automobile to not only surrender the vehicle but pay to the lender the difference between the value of the vehicle and the outstanding balance on the loan, together with interest and any other costs, fees and charges.
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.
In North Carolina the purchase and sale contract between the buyer and seller will contain the legal rights and remedies of the parties. Carefully examine the paperwork that was signed at purchase to see what remedies or requirements are available. For example, a purchase contract might allow a grace period on a missed payment. If an item is repossessed within the grace period, such a repossession might be unlawful.
In addition, most contracts for goods must comply with the North Carolina Retail Installment Sales Act, which is set out in Chapter 25A of the North Carolina Code. Review the terms of the contract to ensure that the agreement complies with state law.
Contact the Lender
Lenders generally do not want to repossess an item. Repossession is time-consuming and expensive. When a person falls behind on payments, it is always advisable to contact the lender to see whether an alternative arrangement may be made.
Repossession Rights of a Creditor
Once a buyer misses a payment, North Carolina allows the creditor to immediately repossess the item unless there is some contractual protection. For a leased or financed car, failure to maintain car insurance will provide a creditor with grounds to repossess the vehicle, because not having insurance constitutes a material breach of the contract.
So long as no breach of the peace occurs, a creditor may enter your property for the repossession without providing notice.
A creditor may demand full payment. If full payment is not made, the seller will then auction off the property. If the property sells for less than the value of the note, the lender has the right to seek the difference from the original buyer, in addition to reimbursement for repossession costs. North Carolina does not allow for wage garnishments, so a creditor is likely to seek a civil judgment and lien against a debtor.