Consumer Protection
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How to Protect Yourself: Automobile Repossession
Source: The Florida Attorney General's Office


When you buy a vehicle on credit, your creditor retains important rights to the vehicle until you have made your last payment. These rights are established by the contract you signed and by state law. The failure to make timely payments carries serious consequences. Your creditor may have the right to repossess or take back your car without going to court or without warning you in advance. However, state law does place limits on how the creditor may repossess a vehicle and resell it to reduce or eliminate the debt. Consider the following:

Talk to your creditor.
Because it is difficult to dispute repossession once it has occurred, contact your creditor once you realize your payment will be late. Many creditors will agree to a delay if they believe you will pay at a later date.

What is default?
Your contract will define what constitutes default. An example could be failure to make a timely payment. However, if your creditor has agreed to accept your late payment or to change your payment date, the terms of your original contract may no longer apply. If you do reach an agreement to modify your original contract, make sure it is in writing and signed by both parties to the contract.

Seizing the vehicle.
Generally, your creditor has legal authority to seize your car as soon as you default on your loan. Once you are in default, your creditor may repossess your car at any time without prior notice and may come onto your property to do so. However, the creditor may not commit a "breach of the peace" by using physical force or threats of force. If this occurs, your creditor may be required to pay a penalty or compensate you for any harm done to you or your property.

Voluntary repossession.
Voluntarily returning the vehicle to the creditor may reduce your creditor's expenses in retaking the car and may reduce the amount you will owe the creditor. You will still be responsible for paying any deficiency on your loan, and your creditor may still enter the repossession on your credit report.

Reselling the vehicle.
Once your car has been repossessed, your creditor may decide to keep the car as compensation for your debt or resell it in either a public or private sale. In either case, your creditor must notify you about what will happen to the car. If the creditor decides it wants to keep the car, you have the right to demand the car be sold instead. You may choose to exercise this right especially if the car is worth more than the amount owed on the loan. If the car is sold at a public auction, you must be notified of the date in advance. If sold at a private sale, you will be notified of a date after which it will be sold.

Any resale must be conducted in a "commercially reasonable manner." For example, a resale price which is below fair market value may be unreasonable. If this occurs, you may have a claim against the creditor for damages or a defense against a deficiency judgment. You may also be entitled to buy back the vehicle by paying the full amount owed, plus any expenses incurred by the creditor. Additionally, you may be able to reinstate your loan by paying the amount you are behind on the loan plus your creditor's expenses.

Personal property left inside the vehicle.
Regardless of whatever method is used to dispose of the repossessed vehicle, a creditor may not keep or sell any personal property found inside. This does not include most improvements made to the car, such as a stereo or luggage rack. If your creditor cannot account for valuable articles left in your car, you may be entitled to compensation and you should consult with an attorney.

What is a deficiency judgment?
A deficiency judgment is the difference between what you owe on your loan and what your creditor receives when reselling your vehicle. A creditor who has followed the proper procedures for repossession and sale is generally allowed to sue you for a deficiency judgment to collect the loan balance. If you are sued, you will be notified of a court date. You should attend the hearing because it may be your only opportunity to raise any legal defenses you may have. An attorney will be able to advise you as to whether you have grounds to contest a deficiency judgment. If your creditor has committed a "breach of the peace," the creditor may lose the right to collect a deficiency judgment.

Choosing a credit counselor.
If you need help managing your debts, you may decide to use the services of a credit counseling organization. Many credit counseling organizations are non-profit and will work with you and your creditors to arrange a manageable way for you to get control of your debt. They can serve as an intermediary between you and your creditors to negotiate lower interest rates and less burdensome fees, and can set up a payment plan that will enable you to pay off your debt within a fixed period of time. Counselors can also help you set up a budget and plan for future expenses. An organization’s use of the word "non-profit" does not always mean its services are free, affordable, or even legitimate. Some credit counseling organizations charge substantial fees or encourage consumers to make "voluntary" contributions. As with all financial matters, consumers should be careful to deal only with reputable organizations.

More information on credit counseling organizations, including tips for selecting a reputable organization, is available online at: Credit Repair and Debt Relief Services