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How Do Car Repossessions Work?

When you purchase a car on credit, you accept the risk that the vehicle can be repossessed. Typically, in these situations, the buyer pays some money at the time of the purchase and borrows the rest from a creditor (generally the car dealer or a bank).  The buyer signs an agreement giving the creditor the right to take back the car if payments are not made.

Unless the agreement has a grace period that allows for making late payments, one late payment – by even one day – is considered a “default.” If a buyer “defaults,” the creditor can take back the car. The creditor does not have to tell the buyer he or she plans to repossess the car. The creditor is also allowed to take back the car without approval from a court as long as he or she does not “breach the peace.” “Breaching the peace” means engaging in actions that are “likely to produce violence.” If a creditor breaches the peace when repossessing a car, the buyer should ask the creditor to stop, and can call the police if he or she refuses to comply.

Even if a creditor can legally repossess a car, certain rules must be followed. First, the creditor must send the buyer a letter within five business days of taking the car.  The letter must explain why the car was repossessed and how much must be paid to get it back. If the creditor plans to sell the car, he or she must notify the buyer at least ten days before the sale. The notice must include the time and place of the sale. If the buyer had personal belongings in the car when it was taken, the buyer must be given access to the car to reclaim the belongings. Creditors are allowed to charge a “reasonable” fee for access to the car.

Buyers can negotiate payment terms. If a buyer anticipates being late on a payment, he or she should talk to the creditor right away. Some creditors may agree to allow one late payment. If the buyer and creditor reach an agreement about a late payment, the buyer should ask for this agreement in writing. The buyer should also keep detailed records of any contact with the creditor.

Legal Aid may be able to help in the case of some unlawful repossessions.  Call 1-888-817-3777 for more information.

This article was written by Blair Mills and appeared in The Alert: Volume 35, Issue 2.