Repossession Laws in Kentucky

Most people need to get a loan to buy a car. When you finance a vehicle, you’re required to sign a contract that states if you’re delinquent on your payments, the lender can take the car back. That’s because a car loan is a type of secured debt that’s backed by collateral (the vehicle).

When the lender takes the car back, the process is known as repossession. Every state has different laws that spell out how repossession works in that state. In Kentucky, lenders are given a lot of leeway in how they’re able to repossess a vehicle. But borrowers also have certain rights. 

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

Kentucky law states that repossession can take place after default, but it doesn’t further clarify. The contract you signed with the lender when you purchased your vehicle should explain exactly how many payments you must be behind before the lender pursues repossession. You can be considered in default after the first missed payment. 

Will I Be Notified Before the Repossession? How?

Under Kentucky law, your lender isn’t required to give you notice that your car will be repossessed. The contract that you signed when you purchased your vehicle should state what notice, if any, you will be given and how you’ll receive it.

How Can I Prevent a Repossession?

State law in Kentucky allows you to reclaim your vehicle any time during the car repossession process up until the point that it’s sold. To get your car back, you’ll need to pay the missed payments, late fees, and any costs incurred by the lender. This process is known as redemption. If this is a possibility for you, you’ll need to request the amount you owe in writing from the lender. 

You may be able to stop the repo company from repossessing your vehicle by filing either Chapter 13 bankruptcy or Chapter 7 bankruptcy. You can speak with a bankruptcy attorney to see if this is the right path for you.

There are also steps you can take before you default on your loan.

• Contact the lender. By contacting the lender and explaining that you can’t make your payments, they may work with you to lower the payment amount and allow you to keep your car.

• Purchase wisely. Don’t trade cars often, put down as much of a down payment as possible, and obtain the best interest rate possible when buying a car. All of these tips will help you keep your payment affordable and help prevent you from owing more than your vehicle is worth. 

Should I Consider a Voluntary Repossession?

When you know you won’t be able to make the car payments on your vehicle anymore, you may want to consider a voluntary repossession. A voluntary repossession is when you turn your car back to the dealership where you purchased it or to the lender. By doing this, you may be able to avoid the added costs of repossession. It also allows you to avoid having neighbors and friends witness having your car towed by a repo company.

What Can Repo Companies in Kentucky Do?

The state of Kentucky has strict rules for repossession companies. They’re allowed to repossess your vehicle if it’s on public property. They’re also allowed to go onto your private property to repossess the vehicle, but they can’t commit a breach of the peace. This prevents them from entering any space that is locked without a court order. If the repo men come onto your property to collect the car, you also can’t breach the peace or use physical force against the repossession company employees. 

There are no licensing requirements for repossession agents in Kentucky. If you have any questions about the repossession being legitimate, you can contact your lender or the local police.

What About the Personal Property in My Car?

If your car is in danger of being repossessed, remove all your personal belongings. If you don’t, and the car is repossessed, the repossession company is required to allow you to retrieve your personal belongings, but this can be an inconvenience. 

The lender is required to send written notice of which company has repossessed your car and how to reach them. These rules only apply to loose items and items that are easily removed from the vehicle, such as a booster seat. Any upgrades or modifications, such as a stereo or a spoiler, may not be removed. 

What Happens After a Repossession in Kentucky?

For the first 20 days after repossession, you’re able to get your car back after paying the lender the entire principal, interest, and fees for the loan. If you don’t pay to have your car returned to you during this 20-day holding period, you’ll receive a notice that tells you what the creditor plans to do with the vehicle.

The creditor can sell the car at a public auction or through a private sale. They must give you notice of when and where the sale will be held, although the amount of notice you must be given is not specified by state law. The lender must conduct the sale in a commercially reasonable manner. For example, they can’t sell your car for a price that’s significantly lower than its fair market value, especially if they seek a deficiency balance. Also, you are allowed to bid on the car at the sale.

If you’ve paid a minimum of 60% of the cash price of the vehicle at the time it’s repossessed, the creditor has 90 days to sell the car. The 90-day time limit doesn’t apply if you’ve paid less than 60% of the cash price. Also, the lender isn’t allowed to just keep the car and pursue you for the amount you owe under the contract terms. Instead, if the lender chooses to keep the vehicle, you must agree in writing, and the creditor must release you from the contract. 

What if My Car Sells for Less Than It’s Worth?

After the sale, the lender will send you a statement detailing how much you owe and how much the car sold for. It’s possible that your car will sell for less than the amount you owe on it. For example, if you owe $14,000 on a vehicle and the car only sells for $9,000, the creditor may pursue you for the $5,000 difference. This is known as the deficiency balance. Take note that the amount you owe doesn’t consist just of the past-due balance under the loan agreement. It also includes late fees, attorney fees, and the cost of repossession. 

If your car sells for less than what you owe, review the sale documents closely. Kentucky requires lenders to sell cars in a “commercially reasonable” manner.  This means the sale must have been made in good faith and followed commonly accepted practices. For example, if the lender placed unreasonable restrictions on who was allowed to bid at the auction where your car was sold, they would be in violation of this requirement. 

This is important because if you have a deficiency balance, the creditor will try to collect the money. If you can’t pay it, they may sue you to get a deficiency judgment from the court. If the sale of your vehicle wasn’t commercially reasonable, you may have a defense against the deficiency judgment and may even be owed damages by the creditor.

Do I Still Owe After a Repossession in Kentucky?

Unless you enter into an agreement with the creditor to the contrary, having your car repossessed doesn’t mean you no longer owe anything under the terms of the car loan agreement. In addition to the past-due loan balance, additional fees and costs may be added to your balance. This includes late fees, the costs of the repossession, storage fees, attorney fees, and additional legal costs. 

If the sale doesn’t bring enough to cover all these additional expenses, you’ll be responsible for paying the remaining amount. One way to reduce this amount is by voluntarily surrendering your vehicle. This won’t fully eliminate a deficiency balance, but it can help make the balance you owe more manageable.

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

Kentucky repossession laws do provide ways to get your car back after repossession. Two of the ways you can do this are by:

• Filing bankruptcy: Bankruptcy provides legal tools, such as an automatic stay, that may allow you to keep your property.

• Redeeming the property: Kentucky state law is clear that up until the car is sold, you have the right to get your car back. To do so, you must pay off the amount you owe in full, as well as any reasonable additional costs and expenses incurred by the creditor.

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

• Kentucky Justice Online has a helpful Repossession FAQ and other information on Property Repossession. 

• The Federal Trade Commission (FTC) has Consumer Information on Repossessions.

• Kentucky Legal Aid provides free legal assistance to low-income, disabled, and elderly Kentucky residents with civil issues such as repossession.