Written by attorney Robert Franklin Dean

Vehicle Repossessions in Maryland

Car dealers and other merchants dealing in very valuable goods who allow customers to finance their purchases usually keep a security interest in the goods they sell. If the purchaser defaults on the payments, the merchant/lender can then repossess the property, in addition to the rights any lender has to file suit to collect on the loan. Repossessions are a matter of state law.

When the borrower defaults (violates the terms of the sales agreement), the lender can repossess immediately. Normally, they send a discretionary notice first. The discretionary notice should be mailed to the borrower(s) at least ten days before repossession. If the lender doesn’t mail the notice, then the lender cannot sue for repossession expenses.

Normally a tow truck performs the vehicle repossession late at night. Md. Code Ann., Comm. Law 12-115 applies – this is called “self-help". The repo agent cannot use force or commit a crime during the repossession.

After the repossession, the lender is required to send a notice to the borrower. The required notice must be mailed to the borrowers within five days after the repossession of the vehicle. It explains the borrower’s rights. The lender must hold the property for fifteen days after the required notice is served on the borrower. During that time period, the borrower can redeem the property by paying the delinquent payments (and also any costs of repossession, if the discretionary notice was sent).

The lender is not entitled to keep personal property left in the vehicle. If the borrower wants to recover personal property from the vehicle, he or she can demand it from the lender. The lender should either return that property to the borrower or else allow the borrower access to the vehicle so he can take the personal property himself.

The vehicle is then sold at a private auction or a public sale, described in Md. Code Ann., Comm. Law 12-115 (j) and (k). Private sales must be commercially reasonable, and the lender must send an accounting to the borrower. If the property is sold at public auction, the lender must provide the borrower with a written statement of how the proceeds were applied. If the vehicle sells for less than the balance owed on the loan, then the remainder is an unpaid deficiency. If the lender has complied with the terms of Md. Code Ann., Comm. Law 12-115, it can file suit and collect this deficiency from the borrower. The deficiency debt is normally dischargeable in bankruptcy.

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