When consumers fall behind on their auto loans, they often come to fear that the vehicle will be repossessed. But just because someone takes your car doesn’t mean it is the end of the story. Find out what to do if your vehicle gets repossessed.
Be Proactive Before Repossession
Most lending companies would rather not go through the trouble of repossessing a vehicle to get paid. Usually, you will have received calls and letters from your lender warning you that you are behind. An experienced collections harassment attorney can help you review those collections efforts for any consumer protection violations. Even when the collections company has followed all the rules, an attorney can sometimes help you negotiate payments that you can afford, so you can keep driving.
Legal Limits on Repossession
Before a lender is allowed to repossess your vehicle, it must first secure its interest in the loan by registering a lien with the Secretary of State at the time the vehicle’s title is issued. Then, once the borrower has defaulted on the loan (usually by missing consecutive payments), the lender is entitled to “self-help”. This means it may remove your vehicle or render it unusable without going to court first. Under Michigan law, when a borrower goes into default the secured party (the lender) may reclaim the collateral (the vehicle) on that loan.
Breaking & Entering
A lender, or its repo company can’t legally break into your property to claim the vehicle. But they still do it. Most often, this involves entering a person’s garage. But even if the door is unlocked, it is illegal for a repo-man (or woman) to open the door or lift the gate to enter your property without your consent.
Instead, the repo company may contact you to arrange a time to pick up the vehicle. Otherwise, it can seize the vehicle from any public street or parking lot. If there is a question about the repossession of a vehicle, it is a good idea to keep it in the garage until the matter can be resolved.
Disturbing the Peace
Repo-men have a reputation as gruff, antagonistic people. That may or may not be well-earned. However, Michigan law puts limits on a secured party’s conduct. When repossessing a vehicle, a party must do so “without breach of the peace”. This means lenders may not:
- Be rude or threatening
- Use physical force
- Create a public spectacle
- Trick you into granting access to your vehicle
Many companies that handle repossessions cross the line when trying to secure collateral. This can invalidate the repossession and allow you to get your vehicle back.
Using the Redemption Period
After a vehicle has been repossessed, Michigan borrowers have 15 days to get it back by redeeming the car. This means you have just over two weeks to pay off the loan entirely, as well as any fees and costs related to the repossession. Many borrowers cannot come up this lump sum. However, if your vehicle was repossessed near the end of your payment cycle, or if you have other sources of savings or assets, this may be an option.
Bidding at Auction
Lenders don’t hold on to vehicles long. Once the redemption period has passed, your car will be put up for auction. Michigan court cases say you must be given a notice of when and where that sale will occur. In some cases, you can attend the auction and bid on your car to get possession back. Be ready to pay whatever you bid up front though. There are no payment plans available.
Defending Deficiency Balances
Michigan courts have said, if a vehicle is sold at auction for less than the balance of the loan, lenders must inform the borrowers of any outstanding deficiency balance after the sale. If instead, you find out years later that you still owe money on a car you don’t own, your collections harassment attorney can use that as a defense against the lender collecting the balance.
By the time a vehicle has been repossessed, borrowers usually feel like they are out of options and need to walk away. But a collections harassment attorney can review your case and help protect your rights.