When purchasing a car, most people do so by securing a loan, which gives the lender a security interest in the property. If a buyer defaults on the loan by failing to make payments, the lender has the right to take possession of the car. This process is referred to as repossession.
Each state has unique laws regarding repossession, and it is important that buyers know their rights when their property is repossessed. An experienced repossession attorney will be well-versed in the laws regarding repossessions and know how to apply them to each case.
Repossession, the seizure of property that typically results from debt nonpayment, can occur suddenly and without prior notice. Despite the fact that some lenders may technically be allowed to seize collateral right away upon a missed payment, the majority of repossessions happen on accounts that are at least 10 days past due.
Any asset used as collateral for a loan or line of credit may be seized if the debt becomes delinquent. This may apply to a home (which would result in a foreclosure), an automobile, or any other item bought on credit.
Repossession can be either voluntary or involuntary. When the lender sends a debt collector to confiscate the defaulted property in order to secure the loan, this is known as an involuntary repossession. As opposed to involuntary repossession, which incurs additional charges, voluntary repossession happens when the borrower chooses to give up the collateral.
For both voluntary and involuntary repossession, the lender will attempt to recover as much of the unpaid debt as possible by selling the property that was given up. Any amount that has not been covered by the sale will thereafter be due from the debtor. The debtor will be informed about the sale and have the option to place a bid. However, keep in mind that at auctions, only cash is accepted.
There can be full or partial repossessions. Full or complete repossession is exactly what it sounds like; the property in question is fully repossessed in order to cover the debt. The process for complete repossession is a confiscation of the good, the sale of the good, and the credit applied to the delinquent account.
For partial repossession, there is an agreement between the parties, and only part of the goods are repossessed. The valuation depends on what was agreed on by the parties.
If a consumer fails to make payments on their car, they risk repossession. In most states, a lender can repossess a car when a debtor is in default of the loan or lease after 10 days of missing a payment. The car repossession process can be done with no notice and does not require a lender to obtain the property voluntarily. A person can come onto the debtor’s property and tow away the car without the debtor’s knowledge. Once in possession of the vehicle, the lender can sell the car to settle the debt. If the sale does not square away the account, the debtor will still be on the hook for the remaining balance.
When a homeowner defaults on a loan, the property is sold as collateral. When a mortgage lender or loan provider seizes ownership of a property because the owners haven’t made their payments, the phrase “housing repossession” is used more broadly. It results from foreclosure. A house is not deemed repossessed until the foreclosure process is complete. Before starting a foreclosure, a bank or lender normally requires homeowners to be at least 120 days behind on their mortgage payments. Though, according to Fox Business, a foreclosure will take roughly 550 days (or 18 months) from beginning to end.
Sometimes a creditor can seize your possessions without filing a lawsuit against you first. This is referred to as repossession when a creditor accomplishes it. Personal property that was used as collateral or bought as a rent-to-own item can be repossessed if a person defaults on payments. Items bought with a credit card or other consumer credit lines cannot be repossessed. However, creditors can collect on the debt of the credit cards through other means.
The best approach to prevent repossession is to inform the lender immediately if a debtor is having trouble making payments. Most of the time, they would rather work out a payment plan than have the item repossessed, especially if the lender is unlikely to recover enough money from the sale to cover the obligation.
With the lender, go over payment options or loan terms that will not have a negative influence on a debtor’s credit history. Going over the terms and having a written agreement is the only way for the parties to protect themselves. Sometimes, hiring an attorney to handle the discussions with the lender can have more weight than trying to handle this individually.
Under California law, which follows Article 9, a lender may seize a vehicle or other property as soon as the debtor is in default on the loan. Anywhere that is open to the public, including a driveway, is a location where the lender may seize the property. The property in question may be repossessed by a repo company or a worker for the legal property owner.
Selling or relinquishing the property, reinstating or refinancing the loan, or contacting the lender to discuss other options can help you prevent repossession.
Bankruptcy may be a smart choice for a debtor if they are having trouble paying off a loan or other debt. In many instances, debtors maintain their possessions—including their cars—when filing for Chapter 7 bankruptcy and can keep some property in Chapter 13 bankruptcy filings.
California had a bill during the COVID-19 pandemic that would have halted repossessions until January 2023, but it was never passed. There are certain pandemic-related reliefs that are offered to debtors through the California Attorney General and general repossession information through the Los Angeles County Consumer and Business Affairs.
In California, repossession is illegal if there has been a disturbance. This is known as Breach of Peace. Repossession businesses are restricted in what they may do during a repossession by the law. For instance, they are not permitted to pose any kind of risk to the consumer. This means that when attempting to reclaim a car, they are not permitted to use intimidation, force, violence, or threats.
Additionally, they should not mislead customers regarding the reason behind the repossession. In addition, when a person’s property is being repossessed, the repossession business must respect it. They cannot damage private property, and they cannot execute a repossession without the consumer’s permission if they do not have public access to the property. A creditor cannot access a private structure or enter a secure space like a closed garage. When a car is parked in a public lot or garage, though, they have the right to take it.
Consumers are not required to receive a pre-repossession notification in California. There is no notice of repossession requirement. After the buyer is in default, the creditor may legitimately perform a vehicle repossession if they have a security interest in it.
However, if the customer objects to the company’s actions in any way, the company conducting the repossession must halt. If they do not, there might be a disturbance. Repossession businesses may carry out repossessions when the customer is not there or when they are asleep in order to prevent a disturbance. However, if the consumer’s property is damaged as a result of these repossessions, a breach of peace may still occur.
Filing for both Chapter 13 bankruptcy and Chapter 7 bankruptcy will put an automatic stay on the creditor’s actions. Meaning that they will not be able to repossess any property to fulfill the debtors. However, the stay is not permanent and will not prevent future repossession actions.
If a property is illegally repossessed or repossessed after filing bankruptcy, there are legal damages that can be sought through the bankruptcy code and bankruptcy law.
In addition to paying the debtor back for any direct expenses associated with having their property illegally repossessed, such as lost income, the lender also has to make up the difference. In addition to likely paying for its own counsel, it would also be required to pay the debtor’s legal fees for handling the repossession.
A Southern California repossession lawyer may be able to assist if your car or another asset has been taken back because you failed to make payments. Before and after a repossession, repossession defense lawyers can be of assistance. Repossession may be prevented by taking proactive measures. There are choices you can make. Setting up a free consultation with an experienced attorney to discuss your alternatives may be essential if you worry that your possessions will soon be seized. After repossession, a bankruptcy attorney might be able to assist you in settling your property’s debts and obtaining the fresh start you need. Filing bankruptcy and following the bankruptcy process can halt repossessions, prevent garnishments, offer debt relief, legal advice and fix your financial situation.
