Consumer: Car Repossession

Most of the time a seller of personal property such as a car obtains a contract called a security agreement. This agreement not only gives the seller an interest in the property but also specifies the reasons that the seller can use to repossess the property. The security agreement allows the seller of the car to repossess the car without going to court if you are in default.

Default happens due to the failure to make payments. It can also be failure to make payments on time or failure to keep insurance, if insurance is required.

If repossession takes place, the seller can sell, lease or dispose of the car. If the car is sold, you must be notified of the time, date and place of the sale.

Once the car is sold, the seller must apply to the original debt the amount of money obtained from the sale or proceeds of the sale. The seller can add to the debt any cost of repossession, storage, and sale of the car.

You will owe any balance left after deducting the amount of the sale from the original debt or lien on the car. For example, if the original debt plus cost of repossession and sale is $5,000.00 and the sale provided $4,000.00, you still owe $1,000.00. This is referred to as “deficiency.” You are liable for any deficiency or any amount owed after applying the amount of the sale to your debt on the car.

The seller of the car may sue you for any deficiency left after selling the car.

If your car is repossessed:

1. You are entitled to any property in the car that was not part of original sale. For example, tools, clothes, stereo equipment, etc. Contact the seller immediately after repossession to recover your property.

2. Make sure that there is a default. Do you owe any payments? Do you have car insurance?

3. Review your documents to determine if there is a security agreement.

4. If you can bring the account up-to-date, contact the seller immediately and offer to make the payments or bring the account up-to-date. You will probably have to pay for towing and storage.

5. If you cannot negotiate with the seller, the car will be sold or disposed of, but you must be notified of the sale.

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