It’s a frightening thought: Money has gotten so tight that you weren’t able to make this month’s payment on your car loan.
Now, you’re worried about car repossession, and imagining the day when a tow truck comes to your house and hauls away your only source of transportation.
But can the lender repossess your car after a single missed payment?
According to the Federal Trade Commission, many states allow creditors to seize 
a vehicle as soon as a borrower defaults on their auto loan.
The loan agreement should define what counts as a default. The most common example of default is failure to make a payment. Once in default, most states allow the lender to repossess your car without notice.
And while that means a lender can technically repossess the car after a single missed payment, it’s more probable that the repossession will happen after you’ve missed multiple payments. Most likely, your lender will contact you first to see if you can bring your account up to date. But if the lender decides to repossess your vehicle, they are not required to inform in advance.
What will happen during repossession?
As we’ve written before, lenders and repo agents are not allowed to use physical force or threaten you with force, take physical property from inside the car or remove your car from a closed garage without your consent.
If a repossession becomes volatile, the police may be called to the scene to diffuse the confrontation and keep the peace. However, the police are not to assist with the repossession. They are not to threaten arrest or command the keys be turned over to the repo man. If the police become involved in the repossession, they may have crossed the line from keeping the peace to breaching the peace – a potential violation of the borrower’s constitutional rights.
After the repossession, the lender is required to provide the borrower with certain notices. These include:
- Notice of Intent to Sell Property – This letter will include details of how to retrieve your vehicle, the balance you owe and how much time you have to act before the vehicle is sold.
- Deficiency Notice – After your vehicle is sold, the lender will send a second letter that informs you how much the car sold for (either at auction or private sale). The lender will deduct that amount, as well as fees for towing and storage, and informs you of the remaining balance owed on the loan. This amount is called the deficiency. If the sale satisfied the remaining balance, the letter will inform you of a surplus.
- Collection of Deficient Balances – If the deficiency is not paid, the lender will often hire a collection agency or law firm to recoup what they’re owed. You may receive collection letters or phone calls attempting to collect the deficient balance. Although you may owe this debt, the collector must follow the law when contacting you. If they threaten or misrepresent the debt by violating the Fair Debt Collection Practices Act, you may be able to bring a lawsuit against the collector.
- Collection Lawsuits: If the lender files a lawsuit against you to collect the deficient balance, do not ignore the summons to appear in court. A default judgment could be entered against you if you do not attend the hearing, giving the lender the ability to take steps such as freezing your bank accounts, seizing personal property, etc.
How can I stop my car from being repossessed?
If you’re worried that your car is in danger of being repossessed, it’s important to reach out to your lender. You may be able to negotiate a payment arrangement to get you through a hardship period. Sometimes the lender may be willing to arrange for payments to be placed at the end of the loan. If any changes are made to the original payment terms of the loan, GET IT IN WRITING!
If your car has been repossessed and you think the lender or repo agent violated your consumer rights in the process, we can help.
The consumer protection attorneys at Flitter Milz have a lengthy track record of protecting borrowers from improper car repossession practices. Contact us today for a free legal evaluation. We can determine whether your lender or their repo agent broke the law.
