Procedure of a repossession
Repossession is usually carried out in accordance with a purchase contract or credit contract, in which the consumer agrees that the seller (the "lienholder") may repossess the object if the signers are past the grace period (generally for prime lenders the critical number is 30 days late making an installment payment but can vary based on how many payments have already been made, the length of the business relationship, reason why past due, etc.). Contracts that authorize repossession also usually specify additional fines that the consumer must pay to the seller, ostensibly to cover the seller's costs of the repossession and of depreciated value of the object, as the seller is now in possession of a "used" object. In some places self-help repossession is not permitted; the lien holder is required to go to court to obtain an order of replevin. However, in some states, repossession is mandatory and suits of replevin are not permitted.[citation needed]
If a lender finds itself in the situation of needing to repossess property while the borrower attempts to avoid this, the dealer may contract the work of repossession out to a repossession agent. Many things can be repossessed, but most repossession agencies focus on auto repossession.
The repo agent normally uses a tow truck or pickup truck with a special towing attachment called a boom, but sometimes they pick the lock or obtain the key from the car owner.
Usually the vehicle owner must be notified of a repossession. The repossession agent will find the car and check the VIN to make sure they have the right car. They will then hook up the car to the tow truck and tow it away or pick the lock and drive it away.
Repossession does not necessarily satisfy the loan. If the repossessor sells the asset for an appropriate amount, and if that amount is less than the amount of the loan, and if the repossessor sues the debtor for the balance (plus reasonable fees if applicable) in a timely manner, the debtor may be liable to pay the balance (sometimes called the "deficiency").[1]
Whether a debtor is actually liable for a balance depends on jurisdiction and on the details of the loan contract. In the case of a nonrecourse debt for example, the debtor is not personally liable for a deficiency.
Repossession in various jurisdictions
General
The existence and handling of repossessions varies greatly between jurisdictions. In some jurisdictions self-help is limited to special circumstances, so in general the right of possession can only be enforced by a court and/or other official agents.
U.S.
When a provision of law requires when repossession takes place, the lien holder has a non-delegatable obligation not to cause a Breach of the Peace (which is synonymous with disturbing the peace) in performing the repossession or the repossession will be reversed, and the party ordering the repossession will be liable for damages (or the lienholder will be held responsible). This requirement not to breach the peace includes even if the breach is caused by the debtor objecting to the repossession or resists the repossession. In MBank El Paso v. Sanchez, 836 S.W.2d 151, where a repossession agent towed away a car even after the loanee locked herself in it, the court decided that this was an unlawful breach of the peace and declared the repossession invalid. The debtor was also awarded $1,200,000 in damages from the bank involved.
Security Interests:
Shown on title held by lienholder.
Recording Requirements:
Uniform Commercial Code (UCC) in effect. Liens on motor vehicle must be on title.
Recovery Requirements:
Kansas cure law in effect, all others per contractual agreement. As per the UCC, repossession is allowed and permitted as long as it is peaceful, after a 20 day "Right to Cure" letter from lienholder to debtor. (Applicable only once during the term of security agreement.) Not applicable to any "substantial impairment" such as lack of insurance, etc.
Redemption Requirements:
Ten day redemption.
Deficiency Requirements:
Judgment notes are invalid but deficiency is permitted if lien instrument so provides.
Special Motor Vehicle Provisions:
No provisions.
