Automobile Repossession Laws

When a car owner falls behinds on payments or simply stops paying, the party that holds the loan or lease for the vehicle may exercise the right to repossess the it. How the process unfolds is very similar throughout the United States--however, laws do vary from state to state. There are a variety of things that can happen during the automotive repossession process.

Repossession

A creditor may repossess a car according to the terms of the contract signed by the owner, according to the Federal Trade Commission (FTC). This could mean that the creditors could seize the vehicle after a single payment or the contract could stipulate a process that must be followed before repossession takes place.

Reclaiming

Some contracts as well as some state laws provide a mechanism for car owners to reclaim their repossessed vehicle. This usually involves paying off the back payments and becoming current with the terms of the loan or lease.

Obligations

If the repossessing party resells the vehicle, the original owner of the vehicle is still required to pay off the remainder of the loan if the resale price doesn't cover the loan total. Also, the original owner is also responsible for the cost of repossession, according to the FTC. Some states require lenders notify the original owners if the car is to be resold.

Personal Effects

The items that were in a car at the time of repossession still belong to the people who left them in the car. The lender or leaser that repossessed the vehicle is responsible for the return of all personal effects.

Disabling Devices

Some lenders and leasers stipulate the usage of an electronic device that disables a vehicle when payments on it are overdue. According to the FTC, this is not permitted in all states. The FTC recommends that potential buyers or leasers contact the state's consumer protection agency or a lawyer for more information should the usage of this device be stipulated.