Generally speaking if you are behind on your car payments or fail to maintain required insurance that triggers a "default" under the contract. Upon default, the lienholder generally has the right to immediate repossession unless there is a "grace period" provided for in the language of the contract. That being said, creditors do not have the right to “breach the peace” to execute a repossession. So what exactly are the repossession rights of a secured creditor upon default?
Let’s first look to the actual statute:
N.C.G.S. § 25-9-609 (Secured party's right to take possession after default)
(a) Possession; rendering equipment unusable; disposition on debtor's premises. - After default, a secured party:
(1) May take possession of the collateral; and
(2) Without removal, may render equipment unusable and dispose of collateral on a debtor's premises under G.S. 25-9-610.
(b) Judicial and nonjudicial process. - A secured party may proceed under subsection (a) of this section:
(1) Pursuant to judicial process; or
(2) Without judicial process, if it proceeds without breach of the peace.
(c) Assembly of collateral. - If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.
The above statute applies to secured creditors. So who are secured creditors? Generally speaking, whoever is holding your title is usually a secured creditor and has the right to repossession via contract. Sometimes even Best Buy, Rooms to Go, or Dell Computer is a secured creditor pursuant to a purchase money security interest.
So what exactly does it mean to “breach the peace” during a car repossession? The term has intentionally not been defined by statute, leaving it up to the Courts to decide. Some Courts have interpreted the following items listed below to be a breach of the peace.
What is a breach of the peace?
Essentially- the Repo man can’t break into your garage to retrieve a vehicle, although they can tow a car parked in your driveway or on the street. If the Repo man knocks on your front door you have no legal duty to open your garage for him to gain access. The police also should not be involved absent a Court Order via “judicial process” mentioned in the statute. Eventually if you refuse to allow repossession the creditor may apply to the Court for a “claim and delivery” with the Clerk of Court where they ask for a Court Order directing legal assistance in repossession. “Claim and Delivery” requires the creditor to go to Court and may even require the creditor to post a cash bond, which is often their last resort. Accordingly, that remedy is rare when it comes to repossession of household goods, which can be easily hidden and have little resale value. Furthermore, removal of HVAC units or windows is often cost prohibitive.
Can my car be repossessed without notice?
You would need to check your contract for any notice requirement and any applicable State law, but often no notice is required. Furthermore actual notice may intentionally not be provided so you don't hide the vehicle.
How long does it take for a car to be repossesed?
The answer varies by creditor, but upon default there often is the right to immediate repossession by the secured creditor. That being said larger lenders are usually not looking to repossess a vehicle the first time a payment is late. Some buy-here, pay-here lots repo at the first opportunity simply as a way to sell the same car over and over again.
Can you get your car back after a repo?
You have no specific right to cure any default in North Carolina like a home foreclosure and hence you are at the mercy of the creditor for return of the vehicle. Be aware larger creditors such as banks, credit unions, Honda Finance, and Ford Motor Credit and much more forgiving than buy-here, pay-here lots. If you can't work something out Chapter 13 bankruptcy may provide a last resort to recover the vehicle other than lump sum payment in full of the entire loan balance.
What happens after repossession?
After repossession of a vehicle the creditor is required to provide you written notice of the sale information. Any proceeds will be applied towards your unpaid balance. Although, a creditor may allow you to cure any late payments and return the car, they are under no duty to do so. You do however have the right to pay the balance in full before the sale or even file a Chapter 13 bankruptcy to regain possession and resume payments. Whatever your current situation, know the law and understand many Repo men do not follow the law. If you feel your vehicle has been illegally repossessed then you may file a complaint with the NC Attorney General. It is advisable to remove your contents from a vehicle at risk of repossession as contents often disappear at the impound lot. Furthermore, vehicles are often damaged during the repossession or parts may disappear while awaiting sale. Generally speaking if you are behind on your payments silence is your enemy. Contact either the creditor or an attorney to seek alternatives as repossession usually leads to a deficiency for which the borrower is responsible and the creditor may even file a civil summons lawsuit to collect the unpaid balance.
In conclusion, it is imperative to locate and read the fine print of the contract and speak with a lawyer about any questions you may have.. Although some provisions may be invalid if they conflict with State law or public policy the contract often controls what a creditor can and can't do. You may have more rights than you realize!