When you are making car payments, it's important to not fall behind. When someone becomes delinquent on his auto loan, the creditor has many rights, depending on the contract and the state resided in, and one may be the right to repossess the car.
All states have different specific laws related to vehicle repossession so it's important to know your own state's regulations. A reliable reference for such laws is the state attorney general's office. (see reference 2)
While some states may require the creditor to give notice, many do not require any forewarning that an auto is to be repossessed. If your state allows it, and the terms are written in the contract, often a creditor doesn't have to go to court or provide any notice before taking back the car.
Typically, once a person defaults on an auto loan, the creditor has the right to repossess the car and is allowed onto personal property to do so, sometimes even coming into a garage to repossess the vehicle.
However, in repossessing the car, the creditor may not commit a "breach of the peace." What constitutes a breach of the peace varies by state, but may include verbal threats, physical force or coming into a closed garage without permission. Every state has different stipulations, so it's important to know the specifics of your state. (see reference 2)
Creditor's Actions After Repossession
Once a creditor has seized a car, it may be sold to recoup the debt or be kept by the creditor as credit toward the debt. The creditor must sell the car in a commercially reasonable manner if it is sold. That generally means that it must be sold for a price within fair market value.
Any personal property in the vehicle at the time of the repossession still belong to the owner, not the creditor. In some states the creditor must make an accounting of personal property found in the car, take reasonable means to keep those items safe, and provide a means for the items to be returned. If personal items are not returned or accounted for, a person may have cause for compensation. (see reference 2)
Financial Issues After Repossession
When someone's car is repossessed, he is liable for the deficiency or the difference between what was owed on the car contract and what the seller got for the repossessed car. Additionally, there may be fees for the repossession and any termination fees that the debtor may owe.
However, if the creditor is guilty of breaching the peace in repossessing the car, the debtor may have grounds to contest the deficiency judgment.
Also, before the sale of the repossessed car, the debtor may be allowed some means to regain possession of the car. This may be by paying back the full amount owed as well as costs associated with the repossession, or possibly by bidding on the car at auction. (see reference 2)
If the debtor was pursuing a bankruptcy in court, the repossession may or may not be allowed under the terms of the bankruptcy. An attorney should be consulted to determine what is allowed in the case. (see reference 2)