When you take out a loan to purchase property, such as a car, your lender typically retains the right to take that property back if you fail to meet your obligations under the terms of the loan. When the lender takes property back, this is known as a repossession. In Florida, you can voluntarily give the property back to the lender before it's forced to repossess it — this is known as voluntary repossession. Talk to a Florida attorney if you need advice about the state's repossession process and laws.
Lenders have the right to repossess certain property when the lender has a security interest in that property. A security interest is a property right that gives the lender the ability to take possession of property used as collateral to secure a loan. For example, when taking out a car loan, you usually give the lender a security interest in the car as collateral. Once you default on the loan, the lender can then take possession of the car because it has a legal right to do so.
Once a creditor repossesses your car, the creditor can then use that car to try to recover the unpaid loan money. According to the Florida Attorney General's Office, a creditor has the right to sell the vehicle at auction or in a private sale. The creditor can then use that money to settle the unpaid debt. However, the creditor can also charge you fees and expenses involved in the repossession and auto sale process.
A voluntary repossession is simply when you hand over the collateral to the lender without forcing the lender to go through the repossession process. For example, if you voluntarily bring your car to the bank that gave you the car loan, this likely saves the bank time and money because it doesn't have to hire a collections agency to collect the car from you. If the bank does hire a collections agency or incurs other costs involved in the repossession, it can charge you for these under the terms of the loan.
Just because you voluntarily turn over the collateral to a secured loan doesn't necessarily mean the lender stops taking action against you. If, for example, you voluntarily turn over the secured property but it's worth far less than the remaining loan amount you still owe, a lender may still sue you to recover that amount. The amount you still owe is generally referred to as a deficiency. Though a voluntary repossession doesn't prevent a deficiency, it can help you in reducing the amount you owe.
- Florida Attorney General's Office: How to Protect Yourself: Automobile Repossession
- Federal Trade Commission. "Vehicle Repossession." Accessed Sept. 30, 2020.
- Experian. "How Long Does It Take for a Repossession to Come off Your Credit?" Accessed Sept. 30, 2020.
- Nolo. "Deficiency Judgment." Accessed Sept. 30, 2020.
- Experian. "What is a Buy Here, Pay Here Dealership." Accessed Sept. 30, 2020.
- Georgia Department of Banking and Finance. "Repossession (Vehicles)." Accessed Dec. 20, 2019.
Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.