Vehicle Repossession
When may a creditor repossess a vehicle?
Creditors in most states (including Indiana) have the right to
seize the vehicle even when you are only a few weeks late in making
payments. Technically, your loan is "in default" of the loan agreement
as soon as you fail to make a payment on time. Under most circumstances,
a lender will attempt to work out a repayment arrangement to allow
you to keep the vehicle. However, if such payment arrangements
are not kept the lender does have a right to repossess the vehicle.
Will I be notified of the intention to repossess?
In most states, the creditor does not have to notify you that
they intend to seize the vehicle. Under normal circumstances, however,
the lender will make every effort to obtain payments or set up
payment arrangements before resorting to repossession.
How is repossession accomplished?
The repossessor in seizing a vehicle cannot "breach the peace".
The law sets out strict rules about what would be considered conduct
that "breaches the peace." The repossessor cannot:
- Use bodily force or threats;
- Break open a locked garage door (but can seize the car from
the street or even a driveway.)
- Be accompanied by a government official, such as the police,
unless the official has a court order to be present.
- Take the vehicle over your oral objections (if you object to
the seizure just before the seizure takes place.)
What happens after the vehicle is repossessed?
The creditor will sell your vehicle and apply the sale price against
the amount you owe. In general, creditors must meet these sale
requirements:
| 1. You must be sent advance notice
of the creditor's intention to sell the repossessed vehicle. |
| 2. The sale cannot be too rushed
and it cannot be overly delayed. |
| 3. Every aspect of the sale, including
the manner, the time, the place, and the terms must make business
sense, and must be "commercially reasonable". |
What happens when the vehicle is sold for less than
what is owed?
You are obligated to pay this difference, called the deficiency
balance, to the creditor. Because it is now an unsecured debt,
many creditors will allow you to make monthly payments for an extended
period of time. It will show as a debt owed, until paid in full,
on your credit report.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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