Laws on Car Repossession
If you purchased your car using borrowed money, there is a good chance that if you don't pay that money back on time, your car might be repossessed. Repossession is the legal term for a creditor's right to take possession of the car and sell the car to pay off your loan. The process of repossession is governed by the security or financing agreement that you signed when you borrowed the money. If you did not sign any security or financing agreement, though, then your creditor probably does not have the right to repossess the car. If you did sign a security agreement, then your creditor can repossess by following the legally required procedures.
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State Law Controls
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Automobile repossession is governed by state law, so the specifics can vary depending on which state you live in. Most states, however, pattern their repossession laws on Article 9 of the Uniform Commercial Code (UCC). The UCC is a model law created by a group of finance and legal experts, and Article 9 is a specific part of the UCC relating to secured transactions. While minor details may vary from state to state, the general principles of the Article 9 are the same in almost all states because almost all states have adopted some version of the UCC.
Default
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Before repossession can begin, you must be in default on your loan. The law does not generally provide a universal definition of default. Whether you are in default, then, typically depends on how default is defined in your loan documents, especially the security or financing agreement. Most likely, default is defined as being at least 30, 60 or 90 days late on one or more payments.
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Physical Possession
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If you are in default, the creditor has the right to come to your house or work and pick up the car. The creditor has the right to remove the car from your property, and the creditor also has the right to make repairs or improvements to your car.
Non-Judicial Repossession
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In most instances the creditor or the creditor's agent or employee can come and pick up your car without the police or an order from a judge. This is referred to as non-judicial repossession, or sometimes self-help repossession. However, the UCC provides that a creditor must stop any non-judicial repossession as soon as a breach of peace occurs. A breach of peace generally means that the creditor must stop if any type of adversarial encounter occurs, including something as simple as the borrower telling the creditor to stop.
Judicial Repossession
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If a breach of peace occurs, the creditor must seek a judicial order to repossess the car. The creditor will have to prove to the judge that a default has occurred and that the creditor has a right to repossession. If the judge issues the order, the local sheriff will execute the order by accompanying the creditor to repossess the car.
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