This week when rapper Tyga’s Ferrari disappeared, rumors came out that it had been repossessed while he was shopping with girlfriend Kylie Jenner – due to several missed lease payments. As Jenner later revealed, the Ferrari had been as part of a surprise. She actually bought her boyfriend a new Bentley.
While repossession is most likely something that Kylie Jenner will not be facing anytime soon, if you are facing it, or even just the possibility of repossession, it’s something you’ll want to understand so you can protect yourself.
What is Repossession?
Repossession is when a creditor decides to take your property without first suing you. The main form of repossession is car repossession, but many other things can be repossessed, including household appliances, large screen TVs, or any other item of your property that can serve as security for a loan. This property will serve as collateral for the loan or other debt that you owe to the creditor. Typically, defaulting on a loan means that you have not made your monthly payments in full and on time. But you can also default on your loan if you do not maintain other areas of your property. For example, you do not maintain insurance coverage on a car you financed.
There are strict rules that cover what and what cannot be repossessed by a creditor if you default on a loan.
What Can Be Repossessed?
A number of things can be repossessed if you default on a loan, including:
Your home. When your home is repossessed it is called a foreclosure. This is when you default on your home loan and cannot make your mortgage payments. The lender evicts you and then sells the property in order to recover as much of the outstanding loan as possible.
Your car. Most auto loans allow a creditor to repossess the car if you do not pay the loan and default on payments. The car is then sold to help the lender recover the money. There are a number of things that can be done in this situation. Read on to learn about your options.
Rent-to-own items. These items include furniture, electronics, appliances, and anything else you rent with the option of purchasing.
Any property used as collateral. A debt is secured can be secured by offering up another piece of property (called collateral) as a guarantee of repayment of the debt. If the debt is not repaid, then a creditor is allowed to take that property through repossession.
A credit agreement will detail what “default” on that specific loan means. This can be for a number of things, including being behind on payments or not maintaining proper insurance, as with a car.
Options to Get Your Car Back
If your car has been repossessed as collateral, and you want it back, there are several options you can employ. Here are those options:
- If it’s allowed in your state or by contract, you are able to redeem the car or reinstate the loan (read on to learn about the differences between redeeming and reinstating).
- Wait until the car has been placed up for sale at the public auction and then bid on it.
- Work with a repossession lawyer to negotiate with the creditor to get the car back. While you are not required to use a lawyer, it is advised, as they will be able to build your case for why you should be able to get the car back. Most repossession lawyers also offer payment plans for their services.
Regardless of what decision you make, you will need to act quickly.
“Reasonable Time” to Act Quickly
If a debtor has repossessed your car, van, truck, motorcycle, or other vehicle or piece of personal property, and you want it back, you’ll need to act quickly. That being said, it’s important that you understand the idea of a “reasonable time.” A lender is required to give you a “reasonable time” to exercise any of the above options before it sells your possession. If you do not take action within this “reasonable time” period, you’ll lose the opportunity to get back your possessions.
How Much is “Reasonable Time”?
While the creditor must give you a “reasonable time,” there is no hard rule on how much time is “reasonable.” Generally speaking, at least 10 days is considered by creditors to be reasonable. Your state might also have specific laws about the timing of notices. California requires at least 15 days' notice prior to the sale. Contact a repossession lawyer to help advise you on your state’s specific laws.
Understanding Your Options
Once you understand you must act quickly, you’ll need to decide how you want to act. Here are the options available to you.
Redemption
The best way you can ensure you’ll get your car back is by paying off the loan. This is called exercising your right of redemption. To fully “redeem” your loam, you will be required to pay back the entire balance of the loan, in addition to certain fees and costs (such as repossession and storage fees). The bank or creditor is required to send you written notice that has all the information about how to redeem the possession. This information should include a telephone number for you to call to find out the exact payoff amount and how to make the payment. You are able to redeem the car at any time prior to the private sale or bank auction. If you don’t receive the notification within five days of your property being repossessed, you should contact the creditor or bank right away to get the payoff amount in addition to instructions for how to redeem your property. Your right to redemption ends when the property is sold.
Time Period for Redemption
The bank or creditor is required to send you a notice shortly after it repossesses the vehicle. This is the notice that should contain all the information you need to redeem the property. Some states, California included, require notice to be given within 48 hours after the property has been repossessed. The bank or creditor must give you written notice of the information you need to be able to exercise your right to redeem within a reasonable time period before the car is sold.
Reinstatement (If Applicable)
Often times people do not have enough money to be able to employ the redemption option. In this case, there is another option available. This is reinstating the loan. Reinstatement means you make the loan current through making up all of the past due payments. This amount also needs to include applicable fees (such as repossession and storage fees) and late charges.
Reinstatement is not allowed in all states, and can also be dependent on the terms of your loan agreement. If reinstatement is an option for you, you should act quickly as this is usually only allowed for a short amount of time – sometimes as quickly as 15 days. This amount of time can be even shorter (or it can be longer) if the right of reinstatement is based on the loan agreement. The amount of time is dependent on what the agreement says.
Buy the Vehicle Back at the Public Auction
If your car is to be sold at public auction you are able to attend the auction and bid on it yourself. The bank is required to give you notice of the public auction your car will be sold at.
Talk to the Bank
If redemption, reinstatement, or buying the car back at the auction are not doable for you, you should consider negotiating an alternative arrangement with the bank or creditor. An example of this could be: you are only able to pay for two months of the three you own. You could work with the bank to negotiate a partial reinstatement of those two months with an agreement to pay the rest of the past due payments later. The bank or creditor might also allow you to work out a new payment plan or refinance the car loan for lower monthly payments. Work with the bank to see what it would agree to. If you know that the bank might be repossessing your property, you should try to work out an agreement before your property has to be repossessed. Chances are they will work out something with you to avoid the effort and money it takes to go through with a repossession.
Work with a Lawyer
If you believe the bank violated your rights during the repossession, such as not informing you properly and with enough notice, or by breaching the peace, you can use this as bargaining leverage to get the car or property back. You’ll want to contact a lawyer to advise you on your legal rights when it comes to repossession. Make sure you record all the dates and times – specifically when you received notices, calls, etc. This information will help a lawyer build your case and potentially get your car or other possessions back.
Be Proactive
Being proactive in this situation can mean the difference between getting your belongings back and losing it to repossession. If more than five days have passed since the property has been repossessed and you still haven’t received a notice from the bank or creditor, do not wait any longer. There is such a little amount of “reasonable time” given that you will need to act quickly if you want to employ any of your options. Contact the bank or creditor to obtain any and all information you need to be able to redeem, reinstate, or bid on the car before it is sold.
Working with a Repossession or Foreclosure Lawyer
If you are facing repossession, it’s important you contact a repossession lawyer that can walk you through your options for how to get your property back, regardless of if it's your car, personal property, or your home.