Repossession is the process of taking back a car after the owner defaults on their auto loan. Each state has different laws and regulations that dictate every step of the repossession process from start to finish. This page will provide an overview of Arizona's Repossession Laws and what you should know if you've fallen behind on car payments.
Written by Upsolve Team.
Updated January 5, 2022
When you buy a car with a loan, you normally give the creditor a security interest in the car, which gives them certain rights. This is what allows the lender to take, or repossess, your vehicle if you don’t make your payments or otherwise default on the loan. State laws determine how repossession companies are allowed to retake motor vehicles and what the borrower’s rights are during the process. This article is about auto repossessions and related consumer protections found in the state of Arizona’s commercial code.
How Many Payments Can I Miss Without Risking a Repossession in Arizona?
Car repossession laws allow a creditor to repossess a vehicle at any point after the borrower defaults on the loan. A default can result from one or more missed payments, or it can result from the borrower violating other terms of the loan agreement. For example, if you don’t carry the required insurance coverage on your car, you may be in default of the loan terms. You can check your car loan contract to see exactly how it defines default.
Will I Be Notified Before the Repossession? How?
Under Arizona law, your creditor doesn’t have to notify you before repossessing your vehicle. The lender may send you a late payment notice that includes a reminder of your risk of repossession, but they aren’t legally required to do so. Arizona repossessions are allowed to be “self-help,” which means they can take place without a court order.
How Can I Prevent a Repossession?
If possible, the best way to stop a potential repossession is by catching up on your loan payments. Call your lender or review your loan contract or lender notices to find out how long you have to make up missed payments. If you’re able to make these payments, call your loan servicer to make a payment by phone. This is preferable because mail can get delayed and some online payment portals make it difficult to pay on past-due accounts.
If you’re temporarily unable to make your monthly payments, you should call your loan servicer right away to see if there’s anything you can do to avoid going into default. Your lender may offer you a temporary forbearance, which pauses your payments for a short time. They may also let you make a payment plan to catch up, or they may be able to change the loan terms or payment amount.
If you’re in need of debt relief for other issues, like a potential home foreclosure or mounting credit card bills, you may want to consult a bankruptcy attorney to see if filing bankruptcy can help you keep your car. A Chapter 7 bankruptcy won’t help with past-due payments, but the automatic stay provided by bankruptcy law will still give you breathing room to evaluate your options. With a Chapter 13 bankruptcy, you can structure a payment plan through the bankruptcy court to pay both your past-due and current payments.
What Can Repo Companies in Arizona Do?
Repossession companies aren’t required to have any special licensing in Arizona. Though the state doesn’t provide oversight in this way, repo agents can’t breach the peace when they take a motor vehicle. This means they can’t use violence, threats of violence, or force. To avoid the possibility of conflict, it’s not unusual for a tow truck to repossess a borrower’s vehicle late at night.
Car repossession laws allow a repo agent to take your car off the street or right out of your driveway. If you’re present during the repossession, you can ask the agent to stop and leave your property. If the agent continues anyway, this could be considered breaching the peace. You can present this as a defense to the repossession if you go to court. You should never block the agent or use physical force against the agent, even if you believe a car repossession is wrongful. This could result in violence and/or criminal charges against you.
What About the Personal Property in My Car?
A repossessor can’t keep or sell the personal belongings you left inside a repossessed vehicle. You should call the number on your last written notice as soon as possible to find out how to retrieve your belongings. If you know you’re at risk of losing your car, you should remove all your personal items from the vehicle so you don't have to deal with getting them back later.
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What Happens After a Repossession in Arizona?
After the lender repossesses your car, it will try to sell it to recoup its costs. It can sell the car at a public auction or via a private sale. After the repossession, the lender must send you a written notice that tells you:
The date and time the car will be sold at a public auction or the time after which a private sale will be made.
About your right to know how the sale proceeds get applied.
Whether you’ll be liable for any unpaid balance after the sale.
The contact phone numbers to inquire about how to redeem your car or get more information.
The law says that the lender must send this notice within a reasonable time after the repossession, but it doesn’t define what “reasonable” means. If a public auction is scheduled, you’ll be able to bid on your own car. Creditors are required to sell repossessed vehicles in a commercially reasonable manner, which means the lender must sell them the same way as other cars for an average market value.
The lender will use the proceeds from the sale to cover as much of the balance on the loan as possible. But first, the proceeds are used to cover the lender’s repossession and storage costs. What remains is used to repay the balance of the auto loan. Anything after that will go to any subordinate security interests and finally to any co-signers on the loan.
As you can see, the money from the car sale may not go very far. In many cases, once the repo costs are added to the loan balance, you’ll be upside-down on the loan. If the sale proceeds don’t cover everything, you’ll have to pay the deficiency balance. In rare cases, there may be money left over. This is called a surplus. If there’s a surplus, you’re entitled to receive it. You should get a written explanation of these calculations before you get a surplus or a deficiency notice.
Do I Still Owe After a Repossession in Arizona?
The credit holder will add its repossession costs plus any fees you owe under your loan contract to the total amount due on your loan. The sale 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 creditor or lender, you might be able to reduce your deficiency balance somewhat by avoiding the lender’s costs of retaking the vehicle.
Can I Get My Car Back After a Repossession in Arizona?
The lender’s pre-sale notice should provide information about how to redeem (get back) your car. The notice may provide a special phone number for getting redemption information. If so, you’ll want to call that number quickly to make sure you follow all necessary steps and don’t miss deadlines. The law allows you to redeem a repossessed car at any point before the lender has sold it or entered into a contract to sell it. The lender may require you to pay off the loan in full in addition to any late fees, the lender’s costs of repossession, and attorney’s fees.