Can a Creditor Take My Car?

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Creditors can take your car, your house, your bank accounts, your boat and anything else of value that you own. Of course, to accomplish this, the creditor needs a judgment issued against you by a court for the seizure. If the creditor is the loan holder for the car and you default on the loan, the circumstances are different and different laws apply. In this case your car would be termed repossessed instead of seized.

The Process

If you owe a debt to a company, they can sue you to recover what you owe. If the creditor wins the lawsuit, the court issues a judgment against you. With this judgment, the creditor can request a wage garnishment order and he can also file an asset discovery. You will be served with a discovery of assets questionnaire which you must answer truthfully to avoid the risk of being held in contempt of court. The questionnaire attempts to discover what you own and its potential worth. With this information, your creditor can get an execution of the seizure order from the judge and seize your car.

Repossession

If you default on your car loan, your creditor can have your car repossessed. Your creditor typically does not have to go to court to repossess your car, as the loan contract generally delineates what will happen if you default on the loan. Usually the creditor has a right to repossession. Your creditor also has the right to sell your loan contract to a third party and the third party then has the right to repossession. When the creditor repossesses your car, he cannot do so with force or use any method that would cause a breach of the peace. What constitutes a breach of peace varies from state to state.

Exemption

If your car is in danger of being seized due to a judgment being issued against you, there is still hope, depending on the worth of your car. You are allowed to keep your car if its value is less than an amount set by state law. This limit varies from state to state. If your car's value qualifies as exempt, your creditor cannot seize your car.

State Variations

Seizure for judgments and repossession for defaults are both covered by state law. As such, the laws vary from state to state. For example, an act that is a breach of the peace in some states can mean the use of physical force, while in another state taking the car out of the garage can constitute a breach of the peace. If there is a breach of the peace, you may have an actionable claim against the creditor in court. Check with your state for your rights under repossession.

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