Repossession Laws in Alabama

When you buy a car with financing, you normally give the creditor a security interest in the car. This gives them certain rights. It’s what allows the financing company to take, or repossess, the vehicle if you don’t make your loan payments or otherwise default on the loan. State law determines how repossession companies are allowed to retake motor vehicles and the borrower’s rights before and after the repossession. 

This article is about auto repossessions, required creditor notices, and related consumer protections in the state of Alabama.

How Many Payments Can I Miss Without Risking a Repossession in Alabama?

State car repo laws allow lenders to retake possession of the vehicle at any point after the borrower defaults on the loan. Defaulting is commonly the result of one or more missed payments. But it can also be the result of the borrower violating other terms of the loan agreement. Your car loan contract will define default and explain exactly what you can do before your loan is considered in default. Look it over carefully.

Will I Be Notified Before the Repossession? How?

Your lender isn’t required to notify you, the borrower, before repossessing a vehicle. That said, the lender may send you a notice of default letting you know you’ve defaulted on your payment. They may include a general reminder of the risk of repossession in this notice. Alabama repossessions can take place without a court order.

How Can I Prevent a Repossession?

If possible, the best way to prevent a vehicle repossession is to catch up on your loan payments. You should review your loan contract or lender notices to find out how long you have to catch up, and then call your loan servicer to make a payment by phone. Payment by phone is preferable because mail can get delayed and some online payment portals make it difficult to pay on past-due accounts.

If you’re experiencing a temporary inability to make your car payments, you should call your loan servicer right away to see if there’s anything you can do to avoid going into default. Depending on your circumstances, you might be able to get a temporary forbearance, which allows you to stop making payments temporarily. The lender may even agree to permanently alter your payment schedule or monthly payment amount.

What Can Repo Companies in Alabama Do? 

Car repossession laws allow repo companies to take your car off the street or right out of your driveway. But repo agents can’t breach the peace when they take a vehicle. That means they can’t use violence, threats of violence, or force.

If you’re present during the repossession, you can ask the agent to stop and leave your property. If the agent continues anyway, the court could later consider this a breach of the peace. You should never block the agent or use physical force against the agent, even if you believe a car repossession is wrongful. Doing so could result in violence and/or criminal charges against you.

Alabama state doesn’t require repossession companies to have any special licensing. 

What About the Personal Property in My Car? 

A repossessor can’t keep or sell the personal belongings left inside a repossessed vehicle. You should receive a notice telling you how to retrieve these items. If you don’t, you can call the number on your last written notice. If you know you’re at risk of losing your car, remove all your personal items from the vehicle so you don't have to deal with getting them back later.

What Happens After a Repossession in Alabama?

You’ll get a written notice before your lender sells your car either at a public auction or in a private sale. The law requires the lender to send this notice within a reasonable time after the repossession, but it doesn’t say exactly what’s considered reasonable. The notice should give you the time and place of a public auction or the time after which a private sale will occur. If a public auction is scheduled, you’ll be able to bid on your own car. The notice should also contain information about your liability for any deficiency balance, a phone number to call about how to redeem (get back) the vehicle, and contact information to get more details.

Lenders are required to sell repossessed vehicles in a commercially reasonable manner, meaning they must be sold in the same way as other cars and for average market price. The lender will apply the sale proceeds in the following order:

1. Its repossession expenses, including the cost of towing/repossessing, storing, and preparing the car for sale.

2. The balance of the loan, which is what you had left to pay on the loan plus any late fees, interest charges, or other additional charges required by your loan documents.

3. Subordinate lienholders, if there are any. 

4. Co-signers on the loan, if there are any. 

As you can see, the money the car brings in from the sale doesn’t just go to repay the loan. Because of this, many borrowers are left with a deficiency balance. For example, if you owed $5,000 on the car and the lender paid $1,000 in repossession costs and fees, you’d owe a total of $6,000. If the car sells for $4,500 at auction, you’ll be left to pay the $1,500 deficiency. You’re more likely to have a large deficiency balance if you were already upside-down on the loan, meaning you owed more than your car is worth.

In rare cases, there may be a surplus. If there is, you’re entitled to receive it.

Do I Still Owe After a Repossession in Alabama? 

The lender will add its repossession costs plus any fees you owe under your loan contract to the total amount due. You’re responsible (or liable) for paying this amount. The sale of the vehicle will reduce this liability, but you’ll still owe the deficiency if the sale price is less than the total you owe. If you voluntarily return your car to the lender prior to the repossession you can reduce your deficiency balance by avoiding the lender’s costs of retaking the vehicle.

Can I Get My Car Back After a Repossession in Alabama?

The lender’s pre-sale notice should contain information about how to redeem (get back) your car before the sale. If the notice provides a phone number to learn more about redemption, you’ll want to call that number quickly to make sure you understand the process and the deadlines. The law allows you to redeem a repossessed car at any point before the lender has sold the car or entered into a contract to sell it. The lender is allowed to require a full loan payoff in addition to any late fees, the lender’s costs of repossession, and attorney’s fees.

Where Can I Find More Information About Repossession Laws in Alabama? 

• AlabamaLegalHelp.org has information on repossession and a guide to free and low-cost legal aid, assistance, and services in Alabama.

• Alabama's Commercial Code lays out the state’s repossession laws and borrower’s rights.

• Legal Services Alabama can provide legal assistance and advice if you have questions about how a lender or repossession company performed a repo.

• The Federal Trade Commission (FTC) has information on how to avoid a vehicle repossession and what your rights are as a consumer.