Knowing your rights when it comes to vehicle repossession is a tricky situation – you may not think you’re at a risk for vehicle repossession until it happens to you. But once it does, the parties involved, such as the lender and the repossession agency, are not the easiest agencies for tracking down information regarding your legal rights and responsibilities.

Fortunately, you are protected by certain laws that spell out how protocols must be followed before, during, and after a vehicle repossession. It is important to know that once your vehicle is repossessed, you still have actions you can take to fight the repossession or to avoid your vehicle being sold.

At San Diego Bankruptcy Attorney, we specialize in helping clients understand their rights around vehicle repossession and similar financial situations. Our years of experience helping clients across the greater San Diego region means we understand your situation quickly and we can provide the most current knowledge and legal guidance for you.

We compiled the information below as a general overview on vehicle repossession in California. This information in not legal advice, as only a professional legal team with knowledge of your specific scenario can provide such counsel.

What is vehicle repossession?

Vehicle repossession is a legal process where a vehicle lender (a financial company who owns the car until the borrower fully pays the loan) can take back possession of a vehicle. The way repossession works varies in each state, and this article will focus on vehicle repossession in California.

Generally, vehicle repossession is divided into two types:

  • Voluntary repossession, when a borrower gives the car back to the lender because he or she can no longer afford to make payments.
  • Involuntary repossession, when a lender takes the car vehicle from the borrower without permission if the borrower defaults on the terms of the loan contract. This is the scenario that most people imply when speaking about vehicle repossession.

Vehicle repossession is an attempt by the lender to close a borrower’s account which is in areas. There are specific protocols and procedures a lender must follow when repossession a vehicle. Importantly, even when a car has been repossessed, the borrower still has options to get back the vehicle and reinstate the loan, as applicable.

Who can repossess a vehicle?

Laws in California designate two types of groups who can repossess vehicles:

  • Car finance companies (lenders) who own loans until the owner is paid in full
  • Registered repossession agencies who can be hired by lenders to perform the repossession

To obtain the authority and ability to repossess vehicles when appropriate, both types of companies (lenders and repossession agencies) must register with the California Department of Consumer Affairs, Bureau of Security and Investigative Services.

Agents seeking to repossess a vehicle legally do not have the right to enter private buildings, such as a garage, or a locked or otherwise secured area, such as a gateway driveway or parking pad. The owner of the property must first give consent to access.

Repo agents do, on the other hand, have the right to repossess a vehicle from any street or publically accessible area within the state. Driveways and parking lots that are not secured or locked are also legal places for repo agents to repossess a vehicle.

The owner of the vehicle does not need to be present for an agent to repossess the vehicle. If the owner witnesses the repossession, he or she may be able to prevent it by paying the balance in full at that moment. In that scenario, the owner has a right to an itemize receipt, and the repossession agent must forward your payment to the car lender.

What happens after my vehicle is repossessed?

After repossessing your car, the repossession agency is required to provide you with a couple pieces of information within 48 hours of the event:

  • A Notice of Seizure. This document must list the contact information for the repossession agency and the legal owner (typically the lender).
  • An Inventory of Personal Effects. This document lists all personal property that was inside the vehicle at the time of repossession as well as details on how to recover the property and the cost for storage fees.

The repossession agency likely returns the car to the lender/legal owner. The legal owner is then legally responsible to notify the borrower of intent to sell the vehicle. The legal owner can serve you with this information in person or by certified or first-class mail, but the lender must notify you in writing within 15 days.

The lender must serve any Notice of Intent to Sell within 60 days of the repossession event. As the borrower, you maintain the right to ask the lender to delay the sale of the vehicle for another 10 days. The Notice of Intent to Sell must include options for the borrower to re-obtain the vehicle, typically including two routes:

  • Redemption, which is paying the loan in full
  • Reinstatement, which is catching up on missed payments

The legal owner may then sell the vehicle, in which there are three typical scenarios:

  • Should the vehicle sell for more than the outstanding balance on the loan, which is unlikely, the legal owner must return this surplus to the borrower within 45 days of sale.
  • If the vehicle sells for the exact amount of the loan’s outstanding balance, the borrower is cleared of the loan.
  • It is much more likely that the vehicle sells for less than the outstanding balance on the loan, in which case the borrower is technically liable for the difference. However, the lender must sue the borrower for this balance. Should the lender pursue this route, the lender must serve the borrower with a court-action Complaint, giving the borrower the opportunity to file an Answer. Both parties will then attend a court hearing for a final decision.

Do laws protect the owner or other parties?

State of California has laws in place that protects both the lender/legal owner of the car (the agency who holds the vehicle loan until it is paid in full) as well as the borrower (the person paying the lender for the vehicle).

Lenders’ rights

If an owner has a car loan with a lender and is late even by a single day, the lender maintains the legal right to repossess your vehicle – and without notifying the borrower first.

Lenders can also repossess the car or vehicle the moment that the owner defaults on any term within the contract – including a missing payment or a lapse in insurance coverage.

The lender is required to reinstate a loan if all prior amounts have been paid, unless the lender can prove any of the following about the borrower:

  • Supplied false information on the loan application
  • Hid or parked the vehicle in a way to avoid its repossession
  • Damaged (or threatened damage to) the vehicle in order to reduce its value
  • Committed (or threatened to commit) violence against any party involved in the repossession of the vehicle (such as the representative of the repossession agency or lender)
  • Employed the vehicle in a criminal offense
  • Reinstated the loan for the vehicle more than protected by law (one time every 12 months, and no more than twice over the length of the contract)

Borrowers’ rights

The borrower of the car has the right to re-obtain the vehicle at the time of repossession and to reinstate the initial loan by simply curing the default. The borrower also has the opportunity to redeem the car and reinstate the loan at any point before the lender sells the car.

The borrower has the right to reinstate a loan contract, but it is limited to one time every 12 months and no more than two times over the life of the contract.

If the borrower’s vehicle is repossessed, the borrower may still have recourse. In the case of a vehicle sale (more information below), the borrower may not be responsible to pay any deficiency.

Redemption vs. reinstatement

The borrower often has two options for getting the vehicle back after repossession: redemption and reinstatement.

Redemption refers to paying the loan in full to avoid losing the vehicle permanently. Redemption may make sense if the outstanding debt is relatively small and/or if the vehicle is worth significantly more than the outstanding debt.

Redemption costs aren’t limited to the loan payoff, however. These charges may include the costs of repossession, storage, and various other fees, which could significantly increase the total for vehicle redemption.

Reinstatement, on the other hand, is a more likely and practical scenario for many. Reinstatement means that the borrower pays only any overdue payments and fees associated with the repossession, but not the entire outstanding balance of the loan. Reinstatement is a conditional right.

Personal property in a repossessed vehicle

The repossession agency is required to log and store any personal property that was found in the car for 60 days, though the vehicle’s owner is responsible for storage fees. After 60 days, the repossession agency can discard any unclaimed property.

Personal property includes any lose items that were stored in the car, but does not include any items you may have installed or affixed to the vehicle, such as a new audio system, customized wheels and rims, etc. You must negotiate with the lender directly for any items that are attached to the car but weren’t included in your original car loan.

Credit score impact due to vehicle repossession

Repossession of your vehicle likely will have a negative impact on your credit score. If your score plummets as a result of a repossession, your credit score can be affected for many years. The repossession itself plus any associated impact will remain on your report for seven years – regardless of whether your repossession was voluntary or involuntary.

There are two common ways that your credit will take the hit:

  • Late and outstanding payments are likely what caused your vehicle repossession in the first place. These bills, will accumulated prior to the repossession, damage your credit score when the lender reports your account in arears to the credit bureaus.
  • Once your car is repossessed, it is listed in the public records of your credit score. Should the court determine the lender has a deficiency judgment on your loan, that decision will also be included on your credit score’s public records.

Should you experienced negative credit scores after repossession, stay diligent. Make sure your repossession is reported the right way by pulling regular free credit score checks. You can also focus on improving other debts by paying them as quickly as possible, which will have a positive impact on your credit score.

Tips to avoid vehicle repossession

You have some ways to avoid vehicle repossession, both pre-emptively and at the time of attempted repossession:

  • Make payments ahead of or on time.
  • Avoid any lapse in insurance coverage.
  • Familiarize yourself with your contract from your lender.
  • Know what laws protect you.
  • Ask to see the license in the case of a repossession (repo) agent attempts to repossess your car and verify the license with the California Bureau of Security and Investigative Services. (If they aren’t appropriately registered with the State of California, the repossession could be illegal).

If your vehicle is repossessed by the lender, speak with a lawyer as soon as possible so that you can determine whether the repossession was performed in accordance with laws and protocol. An experienced attorney can provide guidance on how to fight repossession, especially if the lender or repossession agency discarded any of your rights or protocol.

San Diego Bankruptcy Attorney serves clients across the San Diego region. We are experts in financial cases, including vehicle repossession and similar situations. We use our knowledge of local laws as well as our experience with various lenders and repossession agencies throughout the area in making sure you aren’t being taken advantage of. Get in touch with San Diego Bankruptcy Attorney today – call 619-488-6168 to be connected with our team of legal professionals.