I'm late paying my car loan. What can the creditor do?
Obviously, the creditor can wait to see if you catch up your payments. If you don’t, then two things can happen.
- Repossess the Car. The creditor with a security interest in your car can come take the car from you.
- Accelerate the Loan. The creditor can declare that you now owe the entire amount of the loan. No more monthly payments. The entire amount is “due and owing.”
Realize that the creditor can do Repossession or Acceleration, or BOTH of them. Usually, the creditor will do both.
Are There Protections For Me Before the Creditor Can Do These Things?
Yes. The creditor has to send you a “Ten Day Notice” telling you how much you owe, and giving you ten days to catch it up. If you don’t catch up the payments (and late fees) in those ten days, then these bad things happen.
Can I lose my car?
Yes, you can lose your car if all of the following things are true:
- In the contract you signed when you borrowed the money, the lender (or creditor) took a lien or “security interest” in your car when you borrowed the money;
- You have fallen behind on your payments;
- The lender has sent you a letter giving you ten days to catch up the payments; and
- You don’t catch up the payments during the ten days.
Can you explain what some of those words mean?
Suppose you borrow money to buy something, like a car. The person or business that loaned you the money is called the “lender” or the “creditor. “
When you borrow the money, you sign a contract promising to repay the loan. The contract will state the dollar amount of each payment each month, the date it is to be paid, and how many payments will be required. If you do not pay on the loan, the creditor can sue you for the money you owe.
Most lenders will take an extra step to protect their right to be paid. The creditor usually also requires you to sign a "security interest" giving them a lien on the property you buy with the loaned money. The property you buy with the loaned money (in this case, the car) is called the "collateral."
The “security interest” is what gives the creditor the legal right to take the car if you don’t pay. The creditor usually does not have to go to court first. They just come and take the car, because that protects the creditor more than suing you.
So How Does This Repossession Process Work?
Suppose you don’t pay on the loan. The creditor with a security interest can legally come out and take the car from you (or whatever it was you bought with the loaned money).
The car will then be sold to someone else. The amount paid for the car will be used to pay some (or all) of what you owe to the lender. If the money from the sale isn’t enough to pay off what you owe, you may still wind up with a legal debt even after the creditor has taken your car. Often, the car is not sold for the amount that you owe to the lender. That means it is likely you will wind up with a legal debt.
What Steps Does The Creditor Have To Take First, To Be Permitted to Repossess My Car?
The creditor must meet a couple of requirements.
- After you are late on payment the creditor must send you a “ten day notice.” This means the creditor has to tell you in writing:
- the amount you owe, AND
- the amount of any late fees you owe, AND
- that if you do not pay in ten days, your car could be repossessed.
- The creditor then has to wait at least ten days to see if you catch up the payments.
- If you catch up your payments and late fees during the ten days, then the creditor cannot repossess your car. But realize that your payment has to be in the creditor’s office by the end of the tenth day.
What if the Creditor Has Agreed to Accept My Payments Late?
Sometimes a creditor may want to “work with you.” The creditor may give you more time to make your payments. If the creditor does this, repossession may not be allowed unless you miss the new deadline and a new Ten Day Notice is mailed.
A change in your due date may happen orally or in writing, or by your creditor repeatedly taking late payments without complaint or reservation.
What Does It Mean If My Loan Is "Accelerated?"
This means the creditor wants the entire amount of the loan paid back immediately. The creditor is “accelerating” all future monthly payments to be due at once. Right now. Immediately. The whole amount.
In this case, you no longer have the right to make payments over time. The creditor can sue you for the whole amount of the loan, not just the payments you have missed. Or the creditor can repossess the car if you don’t pay off the whole amount of the loan.
Just like repossession, the creditor cannot “accelerate” your loan unless a Ten Day Notice was given AND you did not catch up the missing payments and late fees.
Suppose I Get A “Ten Day Notice” and Don’t Catch Up, and The Creditor Sends Me A “Notice of Acceleration” On My Loan. Will I Be Okay If I Catch Up the Missing Payments After That?
Probably not. If the creditor has accelerated, then you owe the entire amount of the loan. Catching up the missed payments isn’t enough.
Making some payments will reduce the total amount you owe. But it will not pay off the entire loan. The creditor who has already accelerated can insist on full payment.
The creditor might decide to take it easy, and give you another chance. But the creditor might decide to be tough, and give you no more chances. The law permits the creditor to go either way.
Once the creditor has met the requirements to accelerate the loan, you’re in a bad place.
Does the creditor have to tell me before he takes my property?
The creditor does have to give you the Ten Day Notice. Once that is done, and you don’t catch up, then in most cases a creditor does not have to give you any more notice before repossession.
Can anyone use force to take my car from me?
A creditor cannot "breach the peace" during the repossession of a vehicle.
“Breach of peace” is a crime under West Virginia law. No one can legally use physical force against you to get what they want. (Even if they are right and you are wrong.) No one can legally make threats of physical harm against you, to get what they want. No one can legally break into your home or garage or business to take what they want.
All of this applies to the creditor or repo man, also. They may have a legal right to take your car. But this does not mean they can use illegal actions to take your car. The creditor or the repo agents cannot use physical force against you to push you out of the way and get your car. The repo man cannot make threats to harm you if you don’t give up the car. The repo man cannot break a lock to get into the garage to take your car. All of these things are a “breach of the peace.”
What Else Might Be "Breach of Peace"?
Any of the following things is a breach of peace:
Physical force or threat of physical force.
Entering your house without permission.
Taking your property from a closed garage without your permission.
Taking your property over your objection.
Pretending to be a police officer.
Having a police officer present, unless the officer was court ordered to do so.
Not leaving your property (whether you own it or rent it) after being asked to leave.
Unless there is a court order, you have not committed a crime if you refuse to allow repossession or to turn over property you haven’t paid for.
If you object to a repossession in any manner, the creditor must leave. If the creditor does not leave your property they are trespassing. You may call law enforcement for help. If you object to a repossession, the creditor can’t repossess without first getting a West Virginia court order and having a West Virginia law enforcement officer enforce it.
If the creditor breaches the peace in repossessing your property, you may sue the creditor for damages or to stop the creditor from selling the property.
Can someone repossess my car if it is in my garage?
Creditors may not remove a car from a secured area such as a closed garage or a gated area that is locked. If your car is in a public parking garage or a driveway, a creditor can remove it.
Can my car be repossessed any time of day?
A creditor may repossess your car any hour of the day or night, without telling you first.
What happens after repossession?
After your property has been repossessed, a creditor can decide to keep it as full payment of your debt, or to resell it. A creditor must tell you in writing if he wants to keep your property as full payment of your debt. If you disagree, you have the right to demand that your property be sold instead.
Most creditors prefer to sell your property. The creditor must send you a written notice if he sells your property. This notice must tell you that the money received from the sale will reduce the amount you owe.
If the creditor gets less money than you owe, then you will still owe the difference.
If the creditor gets more money than you owe, then you will get the extra money.
Can I get my car back after it has been repossessed?
West Virginia residents have the right to buy back ("redeem") a repossessed vehicle. You must do this before the car is sold to someone else.
To redeem the car, you must pay the entire amount due on the car loan. This may also include any reasonable fees that are related to the repossession, such as storage costs and attorney's fees.
Sometimes a creditor will reinstate the car loan if the debtor can pay the past due amount as well as any fees associated with the repossession. If the loan is reinstated, you must stay current with your payments or the car will be repossessed again.
I had other belongings in my car when it was repossessed. What happens to my personal belongings in the car?
A creditor cannot keep or sell any property that was taken along with the property you were buying. This includes property you may have had inside a repossessed car. A creditor must take good care of your other property and return it to you.
However, improvements and additions to the car such as a stereo or luggage rack become part of the car. The creditor can leave those in the car and sell them with the car.
What if my property was sold after the repossession and it wasn't enough to pay off my loan?
If the money from the sale doesn’t cover your debt, you may owe the difference. This is called a “deficiency.” Your creditor may file a lawsuit to get a deficiency judgment.
This depends on the amount you owed when the car was repossessed. If it was a relatively small amount, then the creditor has to make a choice. The creditor can repossess the car OR leave the car alone and sue you for the full amount you owe. One or the other, but not both.
You may have a defense to the suit for money remaining unpaid after repossession, If your creditor didn’t follow the rules for repossession, or didn’t give you proper notice, you may be able to win a court case. If the creditor didn’t sell the property in a “commercially reasonable way,” you may be able to win a court case.