Repossession: Questions and Answers
HOW CAN I KEEP MY CAR / TRUCK FROM BEING REPOSSESSED?
DO NOT rely upon the word of a lender's staff who say they "will work with you" when you get behind in payments. They are not bound by such statements.
If you are behind in payments, filing a Chapter 13 bankruptcy can give you a chance to catch up your payments and keep your vehicle from being repossessed.
If you have a good reason to believe that the lender does not have the right to take the vehicle, you can put the car / truck in a place where the lender cannot find it, or
You can refuse to allow the tow truck onto your property. It is a "breach of the peace" for a towing company to come onto private property when the person living there has told them not to. But note: If you cannot make the payments and/or you expect to have to give up the vehicle soon, you are running up costs by keeping the lender from taking it back. The lender will pass these costs on to you.
Note: If a towing company comes to get the vehicle with a court order, (a "Writ of Possession"), you must let them take the vehicle.
IF I TELL THE LENDER TO TAKE THE CAR BACK, OR I TURN IT BACK IN MYSELF, WILL THAT CLEAR UP THE DEBT ON THE CAR?
No, probably not. The lender will re-sell the car, and if the sale price does not cover the whole amount you owe on the loan, you will have to pay the difference. For example: Jim owed $5000 on his car when it was repossessed. The car sold at auction for just $4500. So Jim still owes the lender $500, even though he no longer has the car.
IF MY CAR / TRUCK HAS ALREADY BEEN REPOSSESSED, WHAT ARE MY RIGHTS?
You have a right to get any personal property out of the car. Do this right away. If you don't know where the vehicle is, call the lender, or refer to the notice which will be sent to you by the lender. It must have a phone number where you can get information about the vehicle's location and the redemption amount (see below).
The lender must send you written notice of the dollar amount it would take to get the car back (this will be the balance owed on the loan plus the costs of repossession). This is the "redemption" amount.
The written notice must also tell you what they plan to do with the car, stating the date, time and place when the car will be re-sold in public, or the date and place after which it will be sold privately. This notice must come fairly far ahead of time, so you have a chance to bid on the vehicle if you want. All aspects of the sale must be reasonable.
Up until the time of re-sale, you have the right to pay the redemption amount and get the car or truck back.
If you have paid 60% of the cash price by the time the vehicle is repossessed, the lender has to re-sell it within 90 days.
The lender has to send you, after the re-sale of the vehicle, an accounting. You must be given a credit, or "rebate", for any charges on the loan that no longer apply, such as future interest charges, and credit insurance that has been canceled.
A lender is not allowed to keep the vehicle and simply reduce the amount you owe on the contract. If the lender wants to keep the vehicle and not re-sell it, they can do so only if you agree to it in writing, and they must give you full credit--that is, let you out of the contract completely.
IF THE LENDER OR DEALER DOES NOT FOLLOW THE RULES FOR REPOSSESSION, WHAT CAN I DO?
If the dealer or lender fails to send you notice of the time and place of the re-sale, a judge can order them not to collect any more money from you, no matter how much you owe.
If the repossession or sale is otherwise not handled right, the lender could owe you damages. At minimum, those damages equal 10% of the cash price plus the interest and other charges on the contract.
It's a good idea to see an attorney if you think a lender has violated the rules about repossession and re-sale -- especially if you are being sued for an amount the lender says is owed after the sale. If you can show the court that the lender or dealer broke the rules, you may owe nothing after the sale, and the lender could owe you money.
KRS 355.9-601 et seq.
Reviewed August 2009