Most customers do not pay attention to the importance of keeping up to date with the monthly payments of the car till such time they have actually managed to miss a few. All of a sudden the phone begins to ring as the lender or his representative gets impatient. If you do not regularize the payment immediately, then it may be possible that you walk out one day only to find your car missing from the spot from where it had been parked. In most cases, the vehicle would not have been stolen but repossessed by the lender – the agreement that you had entered into authorizes him to do just that, subject to certain restrictions.
How Do You Get To Know Your Rights?
Even before you actually miss out on making a monthly payment; it is vital that you know what your rights are. The security document that you had signed while taking on the loan specifies all the rights and obligations of both the parties. This document is given by the lender to the Department of Motor Vehicles to enable putting a lien on the vehicle. Usually you will have a copy but if you are missing it then you can request the lender to give you a copy from his records. Be sure to read it thoroughly though you will discover that these documents are legally watertight and there’s nothing much you can do as they are prepared by topflight lawyers appointed by the finance companies to protect their very large financial exposure.
How Can the Lender Repossess the Vehicle?
All automobile loans are secured loans, which basically mean that the vehicle acts as the collateral to secure the loan against default. In a situation when you consistently miss out on making the monthly payments, the lender can take back or repossess your car. According to the terms of the loan agreement, it is also not necessary for the lender to also inform you that the act of repossession has been initiated.
What Happens After Repossession?
After the lender has taken possession of your car, he will send you a notice asking for the payment of the full loan amount outstanding by a certain date else he would sell the vehicle off for the maximum amount he can get and set it off against the loan. If the sale proceeds are more than the loan, you will get something back. However, in case you are upside down, i.e. the value of the vehicle is less than the outstanding loan, and applicable recovery and legal fees, and then there will be amount remaining called a “deficiency balance”. You, along with your co-signor, are legally obligated to pay that amount. Unless this is paid, the lender can file a lawsuit to recover the amount from you and the co-signor. This may happen even in cases the car has been returned voluntarily by you to the lender.
Debt Relief: Act Now Before Car Repossession
If your financial status has been damaged extensively due to your changed circumstances or gross financial imprudence then it is likely that you would have been defaulting on your other monthly dues as well on your other loans and credit card outstanding. If the situation is really grave and there is no way you can personally work out a way of getting out of the mess then you could approach a professional debt relief company. They will evaluate your financial records, how much you owe and how much you earn so that they can chalk out a proper financial strategy for you.
The expertise of these agencies extends to negotiating with your creditors to bring down the debt level as well as the rate of interest. If there are too many creditors and you are finding it difficult to keep track of the monthly dues, they can also arrange for a consolidation of debt and leave you with a single amount outstanding and a single monthly payment to make. Considering your individual cash flows, they will be able to suggest a repayment plan that you can afford and that which enables you to retain your home and car, as well as pay for the essentials of daily life.
Author bio: Sam Adams is a lawyer who has had extensive experience of working with financial companies with large exposure to automotive loans. An expert of debt relief and negotiation, he writes extensively on the subject in various online media. Click here to know more about debt relief.
- 1 Downeaster guide to debt collection and repossession
- 2 Massachusetts Car Repossession Laws
- 3 What happens after my car is taken? Can I get it back?
- 4 Should I get my car back or let it go?
- 5 Have My Repossession Rights Been Violated?
- 6 So what if my rights were violated?
- 7 Can my car be taken over my objection? What is a breach of peace?
- 8 Can the repo man come onto my property?
- 9 What Happens If I Hide My Car From Repossession?
- 10 Repossession Rights - Dealing with a Car Repo - Laws, Tips.
Downeaster guide to debt collection and repossession
Bureau of Consumer Credit Protection
DOWNEASTER GUIDE TO
DEBT COLLECTION AND REPOSSESSION
The Maine Bureau of Consumer Credit Protection was established in 1975 to enforce several consumer protection laws:
- Consumer Credit Code
- Fair Credit Billing Act
- Fair Credit Reporting Act
- Fair Debt Collection Practices Act
- “Plain Language” Contract Law
The Bureau conducts periodic examinations of creditors to determine compliance with these laws, and responds to consumer complaints. The staff also conducts educational seminars and provides speakers to advise consumers and creditors of their legal rights and responsibilities.
John Elias Baldacci
Home Page address:
DOWNEASTER GUIDE TO DEBT COLLECTION AND REPOSSESSION
Bureau of Consumer Credit Protection,
11th Printing; February 2004
Although we all hope to pay our bills in a timely manner, there are the occasions beyond our control (for example, loss of job, divorce) when we may encounter the debt collection process.
1) Collection agencies and repossession companies collecting debts incurred in this State must be licensed?
2) You can write a letter to a debt collector requesting no further contact, and the collector must comply with your request?
3) If your car is repossessed, it will be sold and you may still owe thousands of dollars on the debt?
Find out more information within the pages of this, the newly revised and updated edition in the series of Downeaster Consumer Guides:
Downeaster Consumer Guide to Debt Collection and Repossession
USING THE BOOKLET
The Maine Bureau of Consumer Credit Protection administers the Fair Debt Collection Practices Act. The purpose of this law is to make certain that Maine consumers are treated fairly by debt collectors and repossession companies.
Collections are done in two ways: either directly by a creditor (as when you are called by a credit card company about an overdue bill), or by a debt collector or collection agency (a separate company that is in the business of collecting debts).
The rules are different for a creditor (the person or company to whom you actually owe the money) than for a debt collector, so ask who you are dealing with, and then determine which rules apply.
This booklet compiles and answers the collection and repossession questions most commonly posed to our staff. Part I deals with debt collectors; Part II (starting on page 12) addresses repossession companies.
REMEMBER: Whether you talk to a creditor or a debt collector, make a note of the date, time and content of the conversation . . . because that’s what they are doing on the other end of the line!
PART I - DEBT COLLECTION
1. HELP! I’VE BEEN CONTACTED BY A COLLECTION AGENCY! WHAT SHOULD I DO?
First, determine if you owe the debt. Whether the collection agency contacts you by phone or letter, the debt collector must, within 5 days after the initial communication, offer to “verify” or prove that you actually owe the money.
If initial contact is made by letter, it must contain language such as this:
“If you dispute this debt, we will send you verification. If you do not dispute the debt within 30 days, we will assume that it is valid.”
The collector must also tell you the amount you owe and the name of the person to whom it is owed.
If the debt is not your, or if the collector is asking for more than you owe, then dispute the debt in writing, and keep a dated copy of your letter for your records.
2. THE DEBT COLLECTOR THREATENED TO RUIN MY CREDIT HISTORY WITH THE CREDIT BUREAUS. CAN THIS HAPPEN?
The debt has probably already been reported by the creditor and is on your credit report. If a collection agency “threatens” your credit history, ask: “Are you saying that if I pay this bill today, my bad account history will be erased?” If the response is “yes,” then get it in writing. Otherwise, you have no guarantee that your credit report will be changed.
However, there may be some collection agencies (usually involving medical debts) that will not report to the creditor bureaus if you pay within a certain number of days, such as within ten (10) days of the date of the notice.
3. IF I OBTAIN A CREDIT REPORT, HOW WILL I BE ABLE TO IDENTIFY A DEBT LISTED THERE?
Since 1992, debt collectors who report to credit reporting agencies have been required to include the name of the creditor, so that the consumer can identify the source of the debt.
4. THE COLLECTION AGENCY SAID IT WOULD SUE ME. IS THAT TRUE?
Under normal circumstances, no. The most it can do is recommend to the creditor (the person to whom you owe the money) that the creditor bring a civil collection action. Most debt collectors are not lawyers, and could not sue you anyway, since the only one who can bring a court action is the creditor. However, some debt collectors are attorneys and are able to file litigation on behalf of their client creditors, while others are “debt buyers” that have actually purchased the debt.
5. CAN A COLLECTION AGENCY EMPLOYEE CALL MY NEIGHBORS OR MY BOSS AND TELL THEM ABOUT MY DEBT?
No. A debt collector may call those individuals only to find out where you live, or how to get in touch with you, but information about the money you owe can be told only to you, your spouse and any co-signors. If the debt collector already knows your address, these third party contacts may be illegal.
In the “old days,” before enactment of the Fair Debt Collection laws, recovery of debts was often a down-and-dirty business. Many prohibitions in the law were enacted over the years because of debt collector practices such as:
1) Parking a “shame car,” prominently emblazoned with the name of a collection agency, outside a consumer’s house until the resulting embarrassment produced payment;
2) Leaving cards on consumers’ doors for all neighbors to see, stating “Jones Collection Agency stopped by to collect your overdue debt. Sorry to miss you”;
3) Communicating by postcard; or
4) Threatening to “send someone around” to collect the debt or do physical harm.
6. THE DEBT COLLECTOR TOLD ME THAT THE COMPANY REPRESENTED THE GOVERNMENT IN THIS MATTER AND THAT I MAY HAVE COMMITTED A CRIME. CAN A DEBT COLLECTOR DO THIS?
A debt collector may not make any false statements when collecting a debt. For example, debt collectors cannot:
A. Falsely imply that they represent the United States government or any State or local agency or government.
B. Falsely imply that they are attorneys.
C. Falsely imply that you committed any crime.
D. Falsely represent that they operate or work for credit bureaus.
E. Misrepresent the amount of the debt.
F. Represent that papers being sent are legal forms, such as court summonses, if they are not.
In addition, debt collectors may not:
A. Give false credit information about you to anyone.
B. Send you anything that looks like an official document that might be sent by any court or agency of the United States or any State or local government.
C. Use any business, company or organization name other than the true name of the debt collector’s business, company or organization.
7. ARE THERE OTHER LIMITATIONS ON WHAT A DEBT COLLECTOR OR COLLECTION AGENCY CAN DO?
A. Time. You cannot be called at unusual or inconvenient times, such as before 8:00 A.M. or after 9:00 P.M., unless you agree to be called at those times.
B. Language. Debt collectors cannot use abusive language; cannot threaten to sue you unless they actually have that ability; and cannot misrepresent their authority. They cannot threaten to do you harm, or tell you that you will go to jail.
C. Place. Debt collectors cannot call you repeatedly at work if they know your employer does not want you to be called there.
D. Legal Representation. Collectors cannot contact you at all once they know that you are actively represented by an attorney.
8. IF I OWE MORE THAN ONE BILL, HOW DO I KNOW THE COLLECTION AGENCY WILL PUT MY PAYMENT ON THE RIGHT ONE?
If you owe several debts, any payment you make must be applied to the debts that you choose. Also, a debt collector cannot apply a payment to any debt you feel you don’t owe.
9. CAN THE DEBT COLLECTOR ADD COSTS TO THE DEBT?
Under most circumstances, collection and legal costs cannot be added to the amount you owe. Only when such costs are allowed both by the contract and by state law can they be assessed.
10. CAN I STOP A DEBT COLLECTOR FROM CONTACTING ME?
Yes. The law provides that mailing a short letter should prevent a collector from calling or writing to you. Use the sample letter, reproduced below, to notify the debt collector:
Re: [Name of Creditor; Account Number]
Dear [ABC Collection Agency]:
I am hereby exercising my rights under the federal Fair Debt Collection Practices Act and I request that you cease all communications with me. I will deal with my creditor directly.
The letter should be sent by certified mail to the debt collector, with a return receipt requested. Remember to keep a copy of the letter for yourself.
11. DOES THIS MEAN THE DEBT WILL DISAPPEAR?
No. The creditor may pursue other means, including hiring an attorney. However, you should not be contacted again by that collection agency, except to let you know that there will be no further contact from the debt collector. Also, the debt collector may notify you that some specific action may be taken, but only if the debt collector or the person to whom you owe money usually takes such action.
If you owe the money, we recommend that you contact the creditor, explain that you have told the debt collector to cease collection efforts, and attempt to work out a payment arrangement directly with the creditor.
12. I HAVE RECEIVED A COURT SUMMONS. WHAT DO I DO?
DO NOT IGNORE THE SUMMONS! Talk to your attorney, if you have one. The summons will give you a certain number of days to file a written paper with the court. Especially, if you have any questions about the debt (for example, if the debt isn’t yours or if you don’t owe as much as is stated in the complaint), bring or mail your written “answer” to the court, and require the creditor to prove the case against you. IF YOU DON’T RESPOND TO THE COURT IN WRITING, THE COURT WILL RULE AGAINST AND YOU WILL LOSE FOREVER YOUR RIGHT TO QUESTION THE DEBT.
13. CAN DEBT COLLECTORS ASK ME TO SEND THEM POST-DATED CHECKS?
Debt collectors may accept post-dated checks only if they notify you before depositing each check. In no case should a debt collector deposit any post-dated check before the date on that check. In our experience, however, it is fairly common (although illegal) for debt collectors to deposit check immediately when they receive them, regardless of when they are dated.
A debt collector must not act unfairly in attempting to collection any debt. For example, the debt collector cannot:
A. Make you accept collect calls or pay for telegrams.
B. Contact you by postcard.
C. Put anything on an envelope other than the debt collector’s name and address. The collector’s name cannot be used if it shows that the letter inside relates to the collection of a debt.
COLLECTION AGENCY AND REPOSSESSION COMPANIES -
1) A license is necessary for each place of business.
2) Licenses expire after two years.
3) The application fee is $400.
4) A surety bond is required based on type and volume of business.
5) The criminal record of any applicant will be considered.
6) No license may be granted to any lawyer whose license to practice law has been suspended or revoked, during the effective period of that suspension or revocation.
7) A change in collection agency ownership of more than twenty-five percent requires a new application.
8) Every application by An our-of-state business may contain:
(a) a certified copy of charter and bylaws; and
(b) a Power of Attorney appointing the Superintendent of the Bureau of Consumer Credit Protection to accept service of process in this State.
9) Licenses must be posted in a conspicuous place in the office where business is conducted.
10) Regulators must review and approve all form collection letters before they can be used with respect to Maine consumers.
14. ARE ATTORNEYS COVERED BY THE LAW?
Attorneys who are regularly engaged in the collection of debts are considered “debt collectors” under Maine and federal law. Complaints about harassment or unconscionable conduct by attorneys collecting debts can be directed to the Bureau of Consumer Credit Protection, or the Maine Board of Overseers of the Bar, Whitten Road, Augusta (mailing address: Post Office Box 1820, Augusta, ME 04332-1820).
15. IS A CHECK GUARANTEE COMPANY A DEBT COLLECTOR?
Many merchants subscribe to companies that offer to “guarantee” customers’ checks. If a check bounces, the check is sent to the “guarantee” company to be collected.
The Federal Trade Commission has determined that check guarantee companies fall under the definition of debt collectors, and are regulated by the federal Fair Debt Collection Practices Act. Provisions of the Act prohibit the demand for additional funds above the face value of the check when attempting to collect on a defaulted check. However, it is possible that a court would allow added fees if consumers are notified by signs posted at the store.
16. DO ALL DEBT COLLECTORS NEED TO BE LICENSED?
No, only those collecting on debts originally incurred with Maine creditors. For example, if you formerly lived in Florida and incurred a debt there, the creditor may hire an unlicensed debt collector to dun you here in Maine.
17. IF A DEBT COLLECTOR OR COLLECTION AGENCY DOES BREAK THE LAW, HOW CAN THE BUREAU OF CONSUMER CREDIT PROTECTION HELP ME?
The Bureau advocates for consumers regarding both the State and federal Fair Debt Collection Practices Acts. In addition, the agency licenses all collection agencies that are located or serve clients in Maine. The Bureau has the power to review the records of those collectors, hold hearings, and even fine companies, or suspend or revoke their licenses for repeated or extreme violations of the law.
IF YOU THINK ANY DEBT COLLECTORS HAVE VIOLATED THE LAW, REPORT THEM TO THE BUREAU OF CONSUMER CREDIT PROTECTION. TO OBTAIN A COMPLAINT FORM, CALL TOLL FREE, 1-800-DEBT-LAW (1-800-332-8529), OR WRITE US AT:
BUREAU OF CONSUMER CREDIT PROTECTION
35 STATE HOUSE STATION
AUGUSTA, MAINE 04333-0035
COLLECTION FORMS ARE ALSO AVAILABLE ON OUR WEBSITE:
PART II - REPOSSESSION
1. HELP! MY CAR WAS JUST TOWED AWAY BY A REPO COMPANY. CAN THEY DO THAT?
Yes. Provided that they (and the creditor) have followed all the rules.
First, if you have missed a regular payment, a written notice called a Notice of Right to Cure Default must have been mailed to you sometime within the past year. This would have given you 14 days to catch up on any back payments.
The Notice may not have actually been received by you; the creditor must only prove that this notice was sent. If the creditor does not have your current mailing address or if you refused to sign for any certified or registered mail, you may never receive a notice.
An example of a Notice of Right to Cure Default is reproduced below:
[Account Number, if any]
[Date] is the LAST DAY FOR PAYMENT
[Amount] is the AMOUNT NOW DUE
You are late in making your payment(s). If you pay the AMOUNT NOW DUE (above), you may continue with the contract as though you were not late. If you do not pay by that date, we may exercise our rights under the law.
If you are late again within the next 12 months in making your payments, we may exercise our right without sending you another notice like this one. If you have questions, write or telephone the creditor promptly.
If you get such a notice, do not ignore it! It is the only notice required before your vehicle can be repossessed.
Second, you must have either ignored the notice, made back payments but fallen behind in payments again within a year, or defaulted under some other provisions of your contract (for example, by failing to keep the vehicle insured).
Third, the repo company can repossess your car only if it can be done without entering your dwelling, and without a breach of the peace. If you confront a repo company employee attempting to repossess your car and order the employee off your property, the repossession should stop, according to the law. (The Bureau of Consumer Credit Protection recommends avoiding physical confrontations, however. If the repo company employee refuses to cease efforts and leave, report the actions to the police, your attorney and the Bureau of Consumer Credit Protection).
RULES OF CONDUCT FOR REPOSSESSIONS AND SALES OF COLLATERAL
1. Repossessions must be done without breach of the peace.
2. After repossession, “reasonable notice” must be sent by the creditor to the consumer of the time and place of any public sale, or of a time after which the collateral will be sold at private sale.
3. At any time before disposition (sale) of collateral, consumer can “redeem” goods by paying balance on loan and the reasonable expenses incurred by the creditor.
4. Creditor must sell within 90 days if 60% or more of the cash price or of the loan amount has been paid. If less than 60% has been paid, then the creditor can propose in writing to keep the collateral, and the consumer can object or consent. If a consumer objects, the consumer can force a sale.
5. The sale must be conducted in a “commercially reasonable” manner. A low price is an indication, but not proof, of unreasonableness.
6. Money received upon resale can be first applied to pay reasonable costs of repossession, storage, preparing for sale and selling, then to the debt.
7. If the sale brings more than the debt plus expenses, the balance (surplus) must be returned to the consumer. If, as is more common, the proceeds do not pay off the debt, the consumer is liable for the “deficiency balance.”
3. MY CAR WAS LEGALLY REPOSSESSED. WHAT HAPPENS TO ALL MY PERSONAL BELONGINGS IN THE VEHICLE?
The repossession company or the creditor must notify you of a place where your items can be retrieved.
4. CAN I GET MY CAR STEREO BACK?
Probably not. Items that are attached to the vehicle (stereo, speakers, roof rack) can be legally retained. Items that can be removed without making any holes (books, tapes, tool box, fuzzy dice) must be made available to you for pick-up.
5. WHAT HAPPENS AFTER THE CAR IS REPOSSESSED?
You have the right to redeem it by paying the full balance plus all reasonable repossession costs.
If you do not do so, the creditor may sell the car at an auction or by private sealed bid sale, as long as the auction or sale is conducted in a “commercially reasonable” manner. If the sale price plus reasonable expenses is less than the amount of your debt, you will still owe the difference, known as the “deficiency balance.” If the car sells for more than the debt plus costs of the repossession and sale, then you are entitled to have that “surplus” refunded to you. The less equity that you have in your vehicle, the less likely that a surplus will exist.
NOTE: The Maine Consumer Credit Code provides an exception to this rule. If your creditor takes back the collateral and the amount financed is $2,800 or less, you are not liable to the creditor for any unpaid deficiency balance on the debt.
6. IS A DEALER-ONLY AUCTION COMMERCIALLY REASONABLE?
Most court decisions from other states have upheld dealer only auctions as reasonable, but each case should be looked at on its own facts.
7. I STILL HAVE MY CAR, BUT I AM WAY BEHIND ON MY PAYMENTS. MY CREDITOR WANTS ME TO BRING THE CAR BACK. IS THIS STILL A REPOSSESSION?
Yes. It will still be listed as a “repossession” on your credit report. In addition, don’t think that you will not owe any money if you simply bring the car back. It will still be sold at auction or private sale, and you will still owe any “deficiency balance.” This often amounts to thousands of dollars. The only advantage to a “voluntary” repossession is that you cannot be assessed the costs of locating and repossessing your vehicle.
If you think your creditor is offering to “call it even” if you bring the car back, then get the agreement in writing.
IF YOU FEEL THAT A REPOSSESSION COMPANY HAS VIOLATED THE LAW, REPORT THEM TO THE BUREAU OF CONSUMER CREDIT PROTECTION. TO OBTAIN A COMPLAINT FORM, CALL US TOLL FREE, 1-800-DEBT-LAW (1-800-332-8529), OR WRITE US AT:
BUREAU OF CONSUMER CREDIT PROTECTION
35 STATE HOUSE STATION
AUGUSTA, MAINE 04333-0035
THE COMPLAINT FORM IS ALSO AVAIABLE ON OUR WEBSITE: www.credit.maine.gov
Debtor’s Bill of Rights
You have the right:
- To request and receive verification (proof) of any debt
- Not to be abused or harassed
- Not to deal with a debt collector, if you make that request in writing
- To cure a default (to bring your credit account current) at least once
- Not to be subject to any use of force or breach of peace
These other credit-related booklets are available from the :
Downeaster’s Pocket Credit Guide -- credit shopping advice and extensive rate tables useful for furniture and appliance financing, home improvement loans and mortgage loans.
Downeaster’s Consumer Guide to Cut-Rate Auto Financing -- Shopping for a new or used car is made easier with this guide to dealer mark-ups, rebates, financing, interest rates, and credit insurance. Includes helpful rate tables.
Downeaster Consumer Guide to Credit Bureaus and Credit Reports -- answers the twenty most commonly-asked questions about Maine's Fair Credit Reporting Act.
Price: Free to Maine residents - $1.50 each to all others.
Bureau of Consumer Credit Protection
Massachusetts Car Repossession Laws
Important Note: We will evaluate your repossession case, but you must fill out the form found here. We receive quite a few inquiries about repossession, and this is how we streamline the process.
What happens after my car is taken? Can I get it back?
If you want to get your case back after a repossession, here are your options:
1. Pay missed payments to car lender
Once your car is repossessed, the lender can demand that you pay the entire loan off before giving you the car back. Many lenders, however, will let you just only the back amount (the "arrears9quot;) and repo charges to get the car back. However, other lenders won't allow this and demand the entire loan from you. This is especially likely in cases of multiple repossessions. If you have not had multiple repossessions, you can usually just call the lender, arrange to pay the arrears, and get your car back.
If even this price tag is too high, see point #3 below.
If the lender demands the entire loan in order to give you the car back, you face a though choice. If you have the money, you can obviously just pay the entire loan off, get the car's title, and wipe your hands of the lender forever. Not everyone has the luxury of having this much money on hand, especially on short notice.
3. File Chapter 13 to get car back fast (and possibly "cram down" car loan)
Chapter 13 bankruptcy is the only way to force a lender to give back a repossessed car immediately without paying them any money. If a lender is demanding that the entire loan be paid (or even if the arrears and repo charges are too high to pay all at once) Chapter 13 bankruptcy forces them to give the car back and take payments over time.
Over the years, we have specialized in using Chapter 13 bankruptcies to force lenders to give back repossessed cars (along with easing other debt burdens.) However, attorneys fees and costs must be paid quickly so that the case can be filed within the 20-day redemption period after a repossession. That usually amounts to less than $2,000, which is usually a lot better than paying off a car loan in full. However, it is still difficult for some people.
There is an additional benefit of Chapter 13. Some car loans can be "crammed down," in a Chapter 13. This involves paying off the car--at a reduced amount based on the car's value--through the bankruptcy court. This right only applies to cars purchased more than two and half years (910 days) before a bankruptcy.
If you would like, you may also submit a bankruptcy consultation form here.
As discussed immediately below, sometimes it makes more sense to just let the car go. If you decide to do this, you will often be liable for a deficiency: The difference between the loan balance plus sale charges minus the sale proceeds (or fair market value) of the car. If you have trouble paying a deficieny, you may be able to defeat it if the repossession process was faulty in some way or by discharging it (and other debts) in a Chapter 7 bankruptcy.
Should I get my car back or let it go?
If you are paying a high interest rate for a deeply-under-water car, it often makes sense to just let the car go (or, as an alternative if you really want it back, file a Chapter 13 to cramdown the loan, as outlined above).
For many car loans, lenders must apply the fair market value of the vehicle to your loan account. However, if the loan balance at the time of repossession is less than $2,000, the lender cannot pursue you for a deficiency after a repossession. However, many loan balances are larger and car lenders sue to collect these claims. People typically either negotiate these debts or file Chapter 7 or 13 bankruptcy to get discharged from the debt.
As discussed below, there also are some circumstances in which repossession notices are illegal and can defeat the debt. We specialize in spotting these violations.
Have My Repossession Rights Been Violated?
There are three ways we commonly see repossesion rights violated in Massachusetts.
Second, there is the notice that you get after a repossession. We want to see this notice. Fax us here 617-507-3456 or email us a PDF. Include your contact information. If this notice is defective, you may be able to receive money damages.
Third, there is the notice after your car is sold at a private sale or public auction.
So what if my rights were violated?
So, what do you have to gain if you seek to enforce your rights? First, if your rights have been violated, you can recover statutory damages along with whatever actual damages you incurred, which usually include the amounts you paid out of pocket for repo, towing, and storage charges. These damages can, under some circumstances, also include compensation for emotional distress.
Can my car be taken over my objection? What is a breach of peace?
No repo company, here in Massachusetts or elsewhere, has the right to breach the peace in the course of a repossession. The reason for this is very ancient. The public peace belongs to society and its government (formerly the king) and no private person, including a repo agent, has the right to breach it.
A breach of the peace occurs when a repo agent uses force or threats of force against people or property. A repo agent also breaches the peace if he presses on with a repossession attempt after you object. The reason for this is that proceeding over an objection has the tendency to lead to violence. Despite this, this often exactly what happens: a repo attempt proceeds over a mild and confused objection. The devil is in the details when it comes to whether this is a breach of the peace. Whether something rises to the level of a breach of the peace usually depends on what acts or threats were involved and how "bad" it all seems in a common sense sort of way.
If a breach of the peace occurred you are entitled to an amount NOT LESS than the finance charge for the car loan plus 10 percent of the principal amount. This can be a large amount of money, so free free to give us a call to discuss it if you think a repo man may have breached the peace in the course of repossessing your vehicle.
Can the repo man come onto my property?
If a repo company enters onto your property without obtaining your permission when they enter, the repossession is unlawful. Massachusetts has a special law on this topic. In most states, a repo man can come onto someone's property (like a driveway) without permission and take a car, but not here.
A repossession company needs to get your permission at the same time they come onto the property that you own or rent. This includes a driveway or open (and, of course, closed) garage. However, there has never been a case in Massachusetts deciding exactly what this special law means. Do they have to call ahead of time? Can they come onto your driveway, knock on your door, and then get your permission? No court has decided. This is significant because most repos happen in the following way: The repo man comes on your property, tells you he is taking your car but that it will be much easier if you just give him the keys. The reason why it will be "easier" if you comply is the interesting part. Sometimes the repo man will say that towing the car would damage it, cost more, cause a commotion, or that he will call the police if you refuse to hand over the keys. All of these threats are illegal because they all coerce your compliance, and if they are communicated over your objection, they also breach the peace.
However, even when words and actions do not rise to the level of a breach of the peace, your lack of affirmative permission for the repo company to be on your property makes the repo illegal. However, if you ultimately give up the keys, it makes for a stronger case if you gave them up because of specific threats. Otherwise, in some circumstances, this could be interpreted as permission from you for the repo man to be on your property.
You can call us during normal business hours for a free case evaluation, or send an email anytime.
What Happens If I Hide My Car From Repossession?
Car repossessions are a common occurrence. Up to 5 million automobiles were confiscated from people who fell behind in their car payments in 2009, according to Philip Reed of the Edmunds.com automotive site. Repossession firms are legally entitled to seize cars on behalf of finance companies when borrowers stop paying, but they must first locate the vehicles in question.
A car loan is secured financing in which you agree to allow the vehicle to act as a repayment guarantee. Your bank or finance company has the right to take your car if you go into default, which often means missing just one payment, according to the Federal Trade Commission. Your contract spells out the exact terms. A repossession firm comes after you to take the vehicle if you default and do not come to an alternate agreement with the lender.
Most states allow vehicle repossessors to seize a car from private property, as long as they do not breach the peace, the FTC explains. Some people hide their vehicles by locking them in garages or keeping them in other secured areas. Repossession firms use skip tracing to track those borrowers and their, according to Reed. Methods include tapping online databases, calling relatives and references and physically checking potential locations. Hidden cars are repossessed as soon as they are left unattended in an accessible area.
You rack up costs if you hide your car when you know it is up for repossession, according to Lou Pizzaro of the television show "Operation Repo." Repossession firms charge finance companies for their recovery efforts, including searching for hidden vehicles and actual seizure expenses. These fees are passed along to you once your automobile is finally repossessed. Your lender can sue you to recoup its repossession costs if you refuse to reimburse them voluntarily.
You may be able to successfully hide your car from repossessors for a while, but Reed warns that you should be prepared to lose it at any time. Do not leave valuable items or important personal possessions in the vehicle. Remove any aftermarket accessories you added, like rims or special stereo equipment. Legally you are entitled to reclaim your personal property after the vehicle is taken, but it sometimes gets lost during the repossession process.
You can turn your car in voluntarily when you know it is up for repossession to avoid the stress of hiding it. You will still owe any remaining amount on the loan if the bank cannot sell the vehicle for enough money to cover the outstanding balance. However, you avoid fees and expenses associated with a repossession, which would otherwise be passed along to you.
Repossession Rights - Dealing with a Car Repo - Laws, Tips.
Find out your repossession rights and how to protect yourself from illegal repossession and creditor harassment.
- When your car is seized by the creditor, what are your rights
It's a bad day when your car gets repossessed. Ending your work day by discovering the repo man has come and gone is a terrible situation. We dont always have enough money to pay our credit cards, but not making our car payment carries a whole separate set of circumstances. One being, your transportation can vanish.
There's a lot of confusion surrounding the legalities of a car repossession and people generally have no idea what their rights are pertaining to the car or how to protect themselves.
When you buy a car, truck, or other vehicle on credit, you should be aware that until you have made the last payment your creditor retains important rights in the vehicle. These rights are established by the contract you signed and by the laws of your state.
Your failure to make timely payments on the vehicle carries serious consequences. Your creditor has the right to "repossess" -- take back your car without going to court or, in many states, without warning you in advance. It's completely legal to take back a car that's behind on payments. You have to remember, that car secured the loan. Its collateral protect the creditor. No judgment is needed to repo your car.
However, your creditor's right to repossess your car is subject to some limitations. In particular, state law places limits on how your creditor may repossess the vehicle and resell it to reduce or eliminate your debt. If any rules are violated, your creditor may lose other certain rights against you or even be required to pay you damages.
Normally, your creditor has legal rights to seize your vehicle as soon as you "default" on your loan. What constitutes default will be stated in your contract, but failure to make a payment on time would certainly be an example. However, if your creditor has agreed to accept your late payments or to change your payment date, the terms of your original contract may no longer apply.
Such a change in your credit contract may be made orally, in writing, or, sometimes, simply by your creditor's repeated acceptance of late payments without complaint. Once you are in default, the laws of most states permit the creditor to repossess your car without prior notice. If your creditor has repeatedly allowed you to pay late and communicated such with you in writing then it's a good idea to keep those letters.
An example of this could be where your credit union or bank has told you it will not take actions as long as you are trying your best and making payments to catch up but then suddenly they come in the night and steal your car. That could be an area where they would have to give the car back.
When seizing the vehicle, your creditor may not commit a "breach of the peace" (disturbing the peace) by using physical force or threats of force. Taking your car over your protest or removing it from a closed garage without your permission also may constitute a breach of the peace, depending on the law in your state. Some customers know this law and will lay on the car, lock themselves inside or make a scene to get the repo agent to back off.
Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or, if any harm is done to you or your property, to compensate you. Also, because of a breach of peace, your creditor may lose the right to collect a "deficiency judgment."
A deficiency judgment is the difference between what you owe on your loan and what your creditor receives when reselling your vehicle. A judgment isn't automatic. The creditor will have to sue you for the deficiency balance. A private repo attorney or your local legal aid society can give you guidance about how your state courts have dealt with these matters before.
Selling Your Car Out From Under You
Once your car has been repossessed your creditor may decide to keep the car as payback for your debt or resell it. In any case, generally your creditor must notify you about what will happen to the car. Under most state laws, your creditor must tell you if it wants to keep the car because you have the right to demand that the car be sold instead.
You may want to exercise this right if the car is worth more than what you owe on it. Most creditors prefer to sell the car rather than keep it. If your creditor chooses to resell the car at public auction, state law usually requires you to be notified of the date so that if you wish, you can attend and participate in the bidding. You'd probably be hard pressed to find another loan because of your credit ding so you'd better show up with cash if you intend on bidding.
If the vehicle is to be sold privately you are usually entitled to a notice of the date after which it will be sold. In any of these circumstances you may be entitled to "redeem" or buyback the vehicle by paying the full amount owed on it plus the expenses connected with its repossession, such as storage and preparation for sale.
Some states have consumer protection laws that also allow you to "reinstate" your loan. This means that you can reclaim your car by paying the amount you are behind on your loan together with your creditor's repossession expenses. Check with your state consumer protection office to learn what the laws are in your state.
Any resale of a repossessed car must be conducted in a "commercially reasonable manner." This does not mean that your creditor must get the highest possible price for the car. A resale price that is below fair market value may indicate that the sale was not reasonable. Failure to resell your car in a commercially reasonable manner may give you either a claim against your creditor for damages or a defense against a deficiency judgment.
Whatever method is used to dispose of a repossessed car, a creditor may not keep or sell any personal property found inside. If you find that your creditor cannot account for valuable articles left in your car you may wish to speak with an attorney about your right to compensation.
The deficiency balance is the amount left over after the car has been sold. Once the car is sold off then the loan becomes unsecured. Since the car is gone, there is no longer collateral attached to the loan and therefore it has become unsecured. Hopefully your creditor will get the full amount of the loan at the sale, but if they dont they'll be coming after you for it.
Since you will be liable for the remaining balance it would be in your best interest to make sure the creditor gets the best price. Even if you know someone that wants to buy the car then pass this information onto your creditor. It's it your best interest to get the BEST price because it will be you paying the deficiency.
You can be sued for the deficiency balance and we all know how rotten it feels to pay for something you no longer have. If you can get involved in the sale process, do your best to do so. Many credit unions and smaller banks will try to get the best price but it's nice to know you can help in any way by spreading word of the car's sale date. Whatever it takes (legally, of course) to get yourself involved in that process can only help you in the end. The less you are left owing on the car, the better, right?!
If you've decided to payback the deficiency balance to avoid being sued or because you want to repair your credit, then you stand a pretty good chance of negotiating a settlement and call it even. Because there is no longer any security attached to the loan the creditor may be willing to accept 40-60% of the remaining balance to settle the debt as paid in full.
You should put the settlement offer in writing as well as getting their acceptance in writing (accord and satisfaction) to protect yourself. Among the terms, ask the creditor to re-rate your account from a 'charge off' or 'collection' to a "settled for less" rating. It simply looks better than a paid charge off. Your creditor may not agree to remove the repossession status but at least taking it out of collections and notating it as settled is a step in the right direction. After some time passes you can then begin to rebuild your credit.
Voluntary Repossession May Save You $$$
It's hard to dispute a repossession so you should contact your creditor when you first realize you will be late with a payment or are expecting delays in the coming months. Communication is key with most debts but especially when it comes to your car. You'd be surprised how many will work with you on catching up late payments because the creditor really doesnt want to deal with a repossession. It's a lot of work.
If your creditor refuses to accept delayed payments or work with you and decides to repossess the car then a voluntary repossession may be something you will want to consider. You'll save the creditor the expense of tracking down the car and paying the repo man which ultimately, you'll have to pay.
You can "redeem" the property by offering the creditor the entire unpaid balance on the debt plus expenses reasonably caused by the repossession. You must do this before the creditor has disposed of or sold the property. Usually you cannot redeem just by paying the amount in arrears unless the creditor approves it. Many credit unions will allow this but generally speaking, once a creditor has the car in their grips, they will not give it back unless you pay it off. Why would they want to chance it again?
Can I go to jail for hiding the car?
Concealing the car can be a crime. Concealment of a vehicle with intent to hinder a creditor is a felony in some states. You need to read your state statute and see specifically what the rule is. It is probably listed under business or commercial fraud. It's not a good idea to hide the car and it's really stressful. You'll spend a lot of time worrying about it and looking over your shoulder and usually the creditor always finds the car eventually. By then, you'll owe more money for all the work they put in tracking it down.
Does a bankruptcy stop a repossession?
A bankruptcy has an automatic stay to protect debtors so any collection efforts would violate the stay. Many times this is how people protect their assets rather than just ceasing payments. A bankruptcy gives you protection rights that not paying does not.
A bankruptcy filing can protect your car in most cases so be sure to consult a good bankruptcy attorney about your car repossession. At the very least a bankruptcy will let you hold onto the car legally until your bankruptcy hearing where the trustee will decide if you need to give it back or are allowed to keep it because of necessity to work. If so, the creditor can agree to reaffirm the debt with you and allow you to continue making payments under the bankruptcy.
What about a "Repo" on my credit history?
A repossession on your credit is very negative and remains for 7 years so it's in your best interest to conduct an investigation of the details. A sloppy record by the creditor may just result in a deletion for you. You should check your credit reports before you decide to dispute it to see exactly how the repo is being reported.
Consumers DO remove repos from their credit reports. It's really just a matter of record keeping combined with using the fair credit laws to dispute it. If you find that there are flaws in the way the creditor is reporting your car loan you should definitely dispute it. Be aware though, that if you still owe money to the creditor and they haven't been able to find you to collect it, bringing attention to yourself through credit report disputes will put you on their radar.
On the other hand if you have sued a creditor for an improper repossession and won, then definitely fight for your right on how its being reported in your credit reports including the right to fix or delete it. If you hire an attorney to fight an improper repossession then he will normally work to protect your credit rating as well.
What if I feel the repossession was conducted in an illegal manner?
If you think your creditor violated your rights by taking back the car then you should contact a qualified repossession attorney. There can be mistakes with the repossession or straight up violations and you may be able to get your car back or go after the creditor for damages.
A good example of this could be as we discussed above -- the creditor accepting your partial payments and then blind-siding you with a repo. This could be considered as "implied acceptance" and therefore, their actions unlawful.
Another practice that is illegal would be the improper sale procedures discussed above. You have a right to be involved in the repossession process and that includes the creditor working to get the best possible price for your benefit. If the car had a fair market value of $15,000.00 and your creditor sold it for $5,000.00 then clearly you've been treated unfairly.
To determine the repo laws for your state or the creditor's state, you can view the statutes per state. Using this information you can determine what was permissible under the law in repossessing your car and whether it was conducted in an illegal or legal manner. You can also look up state by state repo codes. These repo codes can help you determine what activity is legal in your state like recovery guidelines, deficiency requirements, documents required to transfer ownership of the car, and state motor vehicle provisions.