When you purchase a car and finance the cost, the lender has certain rights. The biggest of these is the right to take your car back if you don't pay for it. In some states, this is called "self help." If you default on your loan, your lender does not need to go to court to address the problem. It can simply take your car back again. This is called repossession.
Check Your Loan Documents
Default is the point at which your lender can legally repossess your vehicle. Exactly when you're in default depends on the terms of the contract with your lender. It may occur as soon as your payment grace period expires, or it may take 30 days. Eventually, however, your lender will contact a repossession agent to take your car if you don't catch up your payments.
Repossession Must Be Peaceful
A repossession agent must take your car without "breaching the peace." In a few states, this means that if you tell the agent not to take the car, the agent can't legally do so. This won't stop repossession indefinitely if you don't pay, but it might buy you a little time. Speak with a lawyer to find out if this applies in your state. Repossession agents also cannot threaten or intimidate you, or enter enclosed property (such as your garage) to get to your car without your permission.
What About Your Personal Property?
A repossession agent must give you the opportunity to remove personal property from your car before your vehicle is taken. If your car is repossessed in the middle of the night or from a parking lot, the lender is usually obligated to let you know where you can go to retrieve your belongings.
Your Lender Will Sell Your Car
Most states require that, after repossession, your lender give you written notice regarding the sale of your vehicle. Your lender should let you know what you can do to prevent the sale from happening. In some states, the law requires that you pay off the car entirely, plus the costs of repossession. Other states are more lenient. In these states, you have to come up with only the past due payments, plus costs. You're usually entitled to know the time and the place of the sale.
Depending on your contract and the laws in your state, you may be liable for a deficiency judgment after the lender sells your car. A deficiency is the difference between your loan balance and what the car sells for. If it doesn't sell for enough to cover your balance, you may still be responsible for this money, even though you no longer have the car. Your lender can sue you for payment.
A Consumer Law Attorney Can Help
The law surrounding car financing and repossession is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a consumer law attorney.
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