What should I know about repossession?

Contents

• What is repossession?
• What are my rights in repossession?
• What are the creditor's rights and responsibilities in repossession?

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What is repossession?

If you financed your vehicle, you most likely signed a contract stating that if you don’t make your payments on time, the creditor can take back the vehicle. This is called repossession. In Georgia, there are laws about how and when a creditor can repossess a vehicle and how you can get your car back if it has been repossessed.

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What are my rights in repossession?

You have the right to get your car back after it was repossessed if you pay:

• All of the payments you owe, and 

• All of the costs the creditor incurred during the repossession, including:

  • Penalty fees,

  • Interest,

  • Towing fees,

  • Storage fees, and

  • Attorney fees

 

You must make these payments before the creditor has:

• Entered into a contract to sell the car; or

• Sold the car.

 

You have the right to any items in the car when it was repossessed. However, you are responsible for retrieving the items no later than 30 days after your second notice from the creditor (roughly 60 days after the car was repossessed). If you do not get your items within the allotted time, the creditor has the right to dispose of it.

 

If you have paid less than 60 percent of the car loan when the creditor takes back the car, the creditor is allowed to keep the car to pay off the debt. However, if you believe the car is worth more than you owe, you have 21 days to object in writing. If you object, the creditor must resell the vehicle.

 

If you paid off 60 percent or more of the car loan when the creditor takes the car back, the creditor must sell the car. You have the right to demand a public sale of the vehicle.

 

If the creditor sells the car for more than you owe, then they must give you the difference. So, if you owe $8,000 on your loan and the car sells for $10,000, the creditor must give you $2,000. This is called a surplus.

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What are the creditor’s rights and responsibilities in repossession?

If a creditor has a secured interest in your vehicle, and you fail to make a payment on time, the creditor has the right to:

• Seize your vehicle at any time,

• Without notice, and

• To come on your property to seize the vehicle. A creditor can take a car out of your driveway, but may not take a car out of your garage.

 

The creditor can seize the vehicle as long as they do not “breach the peace.” Breaching the peace generally means the creditor cannot use force, damage other property, or threaten you to repossess your vehicle. 

 

If the sale of your car does not cover the amount you owe the creditor, the creditor has the right to sue you for the difference. This is called a deficiency. So if you owe the creditor $10,000 and the car sells for $8,000, you still owe the creditor $2,000. However, the creditor MUST notify you within ten days of the repossession that they plan to come after you for the money. The creditor is also responsible for notifying you of your right to demand a public sale, your right to redeem your car, and for notifying you of the date and location of the sale. 

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Contents

• What can I do to avoid repossession?
• Do I have defenses if the creditor sues me for a deficiency?

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What can I do to avoid repossession?

It is important to keep up with your car payments because a creditor can repossess your vehicle after one late payment. 

• If you are late on your payment, but can gather some money, you may be able to make up the late payment before the loan officially goes into default. Read your loan documents carefully to see when you are in default. Some loans may be in default immediately after a missed payment, while others may give a grace period.

• If you are in default, but can gather money, you may be able to reinstate or renegotiate the loan. To reinstate the loan, you must get the agreement of your creditor and pay off everything you owe. If you renegotiate the loan, be aware of additional fees and unfavorable terms. Get any agreement in writing.

• If you cannot make your payments, but think you can get a good deal, you may want to consider selling the car yourself. Sometimes you can get a better price than a dealer’s auction. You must have the creditor’s permission to sell the car. You will still be on the hook if you sold the car for less than you owe the creditor.

• If you cannot make your payments, and know you will not be able to in the future, you may want to consider returning the car to the creditor before it is repossessed. ONLY DO THIS if you are able to get a signed document from the creditor agreeing that they will not come after you for any deficiency.

• If it makes sense financially, filing for bankruptcy will temporary stop repossession. The creditor may ultimately be able to take back the car, but will be prevented from getting a deficiency judgment. Read our article on bankruptcy to decide if bankruptcy is the right decision for you.

 

You should not hide your vehicle from a creditor. Hiding property from someone that has a security interest in that property (like a dealer does for a car), is a crime in Georgia.

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Do I have defenses if the creditor sues me for a deficiency?

If the creditor sells your vehicle and it doesn’t cover the amount you owe on the loan, they can sue you for the deficiency balance. In some cases, you might have a defense to a deficiency action. Some common defenses include:

• The creditor breached the peace or damaged personal property during repossession.

• You are in the military and the creditor took your car without a court order. The Servicemembers Civil Relief Act (SCRA) protects active duty service members.

• Your creditor had a history of accepting late payments from you. 

• The creditor did not provide you with the proper notices:

  • Notice that they intended to seek deficiency. This notice, must:

    • Be sent by registered or certified mail or statutory overnight delivery

    • Advise you of your rights of redemption, as well as your right to demand a public sale of the repossessed motor vehicle

  • Notice of the date and address of the sale if you ask for a public sale,   

• The sale of your car was not done in a commercially reasonable manner.

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