When Can a Car Be Legally Repossed?
A car can be repossessed when either the law provides for repossession or your contract provides for repossession. Generally, your car can only be repossessed if you are default under your loan agreement. Sometimes, the law allows a creditor to repossess your car even if you don't have a loan agreement.
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Security Interest
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If you take out a loan to pay for a car, your lender most likely required you to sign a stack of paperwork as part of the loan application and approval process. One of the documents you signed is called a financing security agreement or a security interest agreement. That security agreement probably gives your lender a "security interest" in your car, which means if you don't repay the loan, then your lender has the right to repossess. Because all of this is a matter of contract, it is impossible to say exactly what contract rights you and your lender have, but most financing transactions are similar.
Default
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Before your lender can repossess based on the security interest, you must be in default under the security agreement. The law does not provide a definition of default. Instead, you must look in your security agreement or loan agreement to determine what a default is. Most likely, a default occurs when you are at least 30, 60 or 90 days late on a monthly payment. As soon as a default occurs, your lender has the right to repossess your car.
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Contract Rights
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Your contract with your lender might include the right of the lender to repossess. If so, the contract will define how and when the lender can exercise that right. Most contracts provide that a lender can repossess immediately upon default and that you, the borrower, have no right to stop the repossession, even if you offer to pay off the loan balance after you default.
Legal Right
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Most state laws give a secured creditor the right to repossess a car even if the contract does not provide for a right of repossession. Most states have adopted the Uniform Commercial Code (UCC). Article 9 of the UCC governs secured transactions. Under Article 9, a lender has the right to repossess upon the default of the borrower. Again, default must be defined by contract because the law does not define a default.
Repossession
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Article 9 of the UCC gives lenders the right to repossess your car without involving a judge or the police. In other words, the lender can hire a tow truck to show up and take your car without a court order. However, if a "breach of peace" occurs, then the lender must stop and go get help from the court and police. A breach of peace is any type of confrontation, including something as simple as you telling the lender that they can't take your car without a court order. However, if you are in fact in default, you will only delay the lender's repossession efforts because they can return with a court order and the police.
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