Tennessee's laws for repossession aren't particularly unique. They mirror many of the same provisions found in other states. Still, if you’re peering out your window watching for the tow truck, that probably doesn’t offer you much comfort. If your car is being repossessed, you need to know exactly what you’re up against and what your rights are.
Given the fact that lenders are not required to obtain a court order to repossess your vehicle, your car can be repossessed at any point after you have failed to make the necessary payments on time.
Contracts With Your Lender
State law doesn’t determine when your auto lender can repossess your car. It depends on the contract you signed when you took out the loan. Most contracts say your lender can take the vehicle if you default by failing to do something you’ve promised to do in the contract – usually to make payments or maintain insurance. Whether this happens the next day or two months later depends on your lender’s policies. According to Clark and Washington, a Tennessee law firm, first-tier lenders like GMAC are typically slower to act than second-tier lenders, such as a used car dealership that financed your purchase itself. You can’t count on this, however, if you have a spotty track record with payments.
Your Lender’s Right to Self-Help
Tennessee is a self-help state, which means your lender doesn’t have to notify you before it sends someone for your car. Finance companies don’t have to take you to court first to get permission to repossess. They do have to follow a few rules, however. For one thing, they can’t breach the peace. This means the repossession agent must collect the vehicle in a civilized and lawful manner. He can’t break into or onto your property to get to it. He can’t tow the car off with you inside or drag you out if you refuse to leave the vehicle.
If your lender or its agent breaches the peace when taking your car, you may be entitled to damages or financial compensation for the ordeal. If you think your lender or its repo man have broken the law, speak with legal aid or a lawyer. At the same time, he’s not powerless if you refuse to comply. Your lender can go to court and ask the judge for an order obligating you to turn over the car. Under Tennessee law, you don’t have to be present when the car is repossessed.
The 10-Day Letter
Tennessee law requires that your lender send you a 10-day letter after it has repossessed your car. This letter is official notice that you’re entitled to redeem the vehicle by paying off the loan, plus fees and costs associated with the repossession. You then have 10 days to come up with the money, and your lender can’t sell the car until after this redemption period has passed.
Understanding Deficiency Lawsuits
If you can’t or don’t redeem your vehicle, your lender must sell it in a commercially reasonable manner, such as at auction. The owner of the finance company can’t sell it to his teenage son for $1, for example. If it sells for less than your loan balance and the repossession costs, your lender can sue you for the difference, called a deficiency. You’ll likely receive a bill for the deficiency first rather than notice of a lawsuit, but if you don’t pay up, the lender can take you to court. However, some contracts don’t include language allowing this, so look yours over or take it to a legal professional to understand the specific terms of your contract.
- Clark and Washington: Bankruptcy Can Stop a Vehicle Repossession or Recover a Repossessed Vehicle
- April Randale Law: Vehicle Repossession and Bankruptcy
- Federal Trade Commission. "Vehicle Repossession." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "If I Can’t Make My Auto Loan Payments, Will My Vehicle Be Repossessed?" Accessed April 7, 2020.
- Commonwealth of Massachusetts. "What to Know if Your Car Is Repossessed." Accessed April 7, 2020.
- Los Angeles County Consumer & Business Affairs. "Vehicle Repossessions." Accessed April 7, 2020.
- Experian. "How Long Does It Take for a Repossession to Come off Your Credit?" Accessed April 7, 2020.
- Association of the Bar of the City of New York. "Repossession." Accessed April 7, 2020.
- Experian. "Collection Accounts for Repossessed Car in Credit Report." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "My Car Has Been Repossessed, and I Was Told It Will Be Sold. What Can I Do?" Accessed April 7, 2020.
- Justia. "Vehicle Repossessions and Bankruptcy." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "What Happens If I Left Some of My Personal Possessions in My Vehicle When It Was Repossessed?" Accessed April 7, 2020.
- Georgia Consumer Protection Division. "Repo Company Charging to Return Belongings Left in Vehicle." Accessed April 7, 2020.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.