Keep The Contract and Other Vehcile Documents Safely Stored at Home or Office
Many people leave the dealership with their purchase documentation in the glove box in a pouch that the dealer may have put there, never looking at the papers again. This can be a disaster if your vehicle is repossessed, and your documents get "lost." Please immediately put your documents in a file cabinet or other safe place where you store your documents. The only documents you should leave in your vehicle are registration and proof of insurance, in case you are stopped or in an accident. TIP: Read the documents at the dealership and ask questions, before you sign them. Don't sign any documents you don't fully understand how much you must pay and the price of the vehicle and all extras, such as service contract. Then, read them again when you get home.
No Notice Required Before Repossession
Many people mistakenly believe that the creditor must send you a written notice, before they may repossess your motor vehicle. Not true, although many creditors give notice, usually because they would rather have you make your payments, because they realize that they should expect to lose money if they need to repossess the vehicle and sell it at auction. Thus, if you are late on your payments or you have not kept collision insurance on the vehicle, the creditor may repossess the vehicle from you. TIP: If you are late on a payment, you should send it certified mail or have some other way to prove you made the payment, including any late charges specified in your contract.
What to Do, When a Tow Truck Comes to Repossess Your Vehicle
If you are behind in your payments and you see the tow truck or repossession vehicle arrive to get your vehicle, you have rights, but there are limits. If your vehicle is in a locked area, such as a closed garage or a locked gate, the repossession agency may not use force to access the vehicle to tow it away, but they may tow it away if it is accessible to them, without harm to persons or property. Also, the repossession agency may not "breach the peace" by disturbing people or making a scene or threatening people with violence. They can take the vehicle at night when people are sleeping, so long as it avoids a "breach of peace" to the extent possible. The court will decide what is and is not a breach of peace and whether the conduct of the repossession agent or the vehicle's owners was appropriate. The repossession agent is not in a position to decide if you are current with the payments or to accept payments during a repossession, although that sometimes happens.
Obtaining Your Personal Items After Repossession
Many people have personal belongings in the vehicle when it is repossessed. The creditor has no legal interest in these items, unless they are part of the vehicle, such as a CD player that you purchased and attached to the vehicle. The repossession agency must send you written notice within 48 hours of the inventory of the personal belongings and how you may claim them or 72 hours if the 48 hours falls on a weekend or legal holiday. The repossession agency must hold your property for 60 days and may charge you a reasonable fee for storage. This is why if you are present for the repossession, you should ask to remove all your personal belongings, as the storage fees can add up and you may find your property is damaged or missing, when you claim it.
Notice from the Creditor After Repossession
The creditor must send all persons obligated on the installment contract a written notice after the repossession. It may be sent by first class or certified mail, but many creditors send it by certified mail, so that they have proof of actual delivery to the consumer, in case this is challenged later. The notice must be in the proper form and accurately disclose your rights to reinstate the vehicle contract and your right to buy the vehicle for the total amount due. If the notice (referred to as the Notice of Intent to Dispose of Motor Vehicle, or "NOI") is defective or fails to include the form for seeking a 10 day extension, then the creditor may not be entitled to a deficiency on the contract. TIP: If the notice is defective, keep this with the contract in a safe place, because the creditor should be prohibited from obtaining a deficiency judgment in court, if the judge agrees that the NOI was defective or that it was not properly delivered to you.
Payment Option Must be Offered, Except in Rare Cases Under Purchase Installment Contracts
In California, if your vehicle is financed at a car dealership as a purchase (not a lease), then within 60 days following the repossession, the lender must send you notice stating how much you must pay to bring the contract current. Then you know what you must do if you want to continue making payments and get the vehicle back. The charges must be itemized, so you can determine if your agreement permits the amounts charged. The notice must explain your right to make the payment within 15 days and to extend that deadline for another 10 days, by sending the written form to request the 10-day extension. The notice must also disclose where the vehicle will be returned and to whom the payment must be made.
There are several exceptions for which the lender may refuse to allow the installment contract to be reinstated, such as intentional misrepresentation on credit application or the vehicle has been concealed or removed from the state to avoid repossession. See Civil Code Sec. 2983.3.
Sale of Motor Vehicle Must be In A Commercially Reasonable Manner
Not only must the creditor send you an accurately prepared NOI before the vehicle is sold and wait for the statutory number of days to elapse, the sale of the vehicle must be in a commercially reasonable manner. This is for the judge to decide, based on the evidence presented. Price alone is not the only factor, although if the sale price is substantially lower than the market value for the vehicle or you have a willing buyer and they prevent that person from submitting an offer which is more than it was sold at auction, the judge could agree with you that the sale was not commercially reasonable and decide to dismiss the creditor's case. Most vehicles are sold at a dealer only auction, but you are permitted to submit a bid for the vehicle. Your contract may express other terms, so read the default terms carefully if your vehicle is repossessed or you have missed a payment.
Experienced Collection Defense Attorney is Key to Defending These Cases
If you are sued, the creditor will probably be represented by an attorney with years of handling similar cases for automobile finance companies. You should immediately contact an attorney with considerable experience representing consumers against such lawsuits. Contract deficiency cases are not simple and the court should be properly briefed on the laws that apply and presented with the evidence, if the matter goes to trial. And, if you lose, because you try to handle this yourself or have a lawyer with little or no experience, a judgment can be entered against you, which will eventually appear on your credit report and be collected from your wages and assets.
Note to Victims of Car Dealership Fraud or Lemon Vehicles
If you purchased a defective vehicle or you were defrauded by the dealership, consult with an attorney for that area of law immediately. Do not simply allow the vehicle to be repossessed, because if the vehicle was defective, then how do you prove it unless you have the vehicle and have a mechanic look at it to make the determination. Also, the law may require you present written notice of the defects or that you believe you were defrauded. You may have the right to have your vehicle bought back by the dealership or manufacturer without harming your credit, which is what a repossession and breach of contract can do to your credit, if you stop making payments, rather than handle a dispute correctly.