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Is a Repossession Order Required When a Car Is Repossessed?

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In a Nutshell

If you’ve fallen behind on your auto loan payments you may be setting yourself up for repossession. The lender has the right to seize the car without a court order and sometimes without any prior notice to the borrower if the borrower fails to make payments for their auto loan. This article will discuss what repossession is, how it works, and how it affects your credit history and your credit score. We’ll also touch on what rights you have as a borrower and how you can prevent repossession.

Written by Attorney Eric Hansen.  
Updated October 1, 2021


It’s great to hit the road and go for a drive in your car. Especially when you’re carefree, you’ve got some good music, and the scenic route isn’t too crowded. Unfortunately, some people have had their car taken from them by their lender, ruining any chance of going for a cruise. If borrowers fail to make payments for their auto loan, the lender has the right to seize the car without a court order and sometimes without any prior notice to the borrower.

Repossession can feel stressful and overwhelming, but it doesn’t have to be. This article will discuss what repossession is, how it works, and how it affects your credit history and your credit score. We’ll also touch on what rights you have as a borrower and how you can prevent repossession.

How Repossession Works

Repossession is a legal process lenders can use when a borrower defaults on a vehicle loan. When a car purchase is financed, the lender has what’s called a security interest in the car, which gives the lender certain legal rights. This is indicated on the loan agreement and the title to the car, which names the lender as a lienholder. If a borrower fails to make car payments on their loan, the lender’s security interest allows them to take the car — known as the collateral asset —  and sell it to address their financial losses. 

A mortgage operates similarly. A mortgage lender has a security interest in the real property they financed and can take possession of the property if you default. This process is called foreclosure. There are more federal and state protections for homeowners facing foreclosure than there are for car owners facing repossession.

Depending on the terms of the loan agreement between the borrower and the lender, as well as state law, creditors and collection agencies have the right to seize, or repossess, the borrower’s collateral without a court order if the borrower defaults on a secured loan. Most auto loans contain a self-help provision. This allows creditors to take action on their own to address a default without an order form from a court. Some state laws allow creditors to pursue deficiency judgments against borrowers. These judgments allow creditors to collect any remaining balance after the sale of the car, including fees paid for the repossession and sale.

If you, a loved one, or a friend are facing repossession, consider consulting with an attorney in your state. A private attorney that specializes in consumer protection and borrowers’ rights can provide expert legal advice on repossession laws, the repossession process, and consumer protections in your state.   

When Can a Car Be Repossessed?

A creditor or a repossession company can repossess your car when you default on your auto loan. Defaulting means failing to meet and follow the terms and conditions of your loan agreement. If you make late loan payments, miss payments, make partial payments, or fail to have the required car insurance coverage on your car, you risk defaulting on your loan. Each loan contract is different though.

Missing even one monthly loan payment can result in repossession. But most creditors will wait until you’re several payments behind before they take action. This could mean getting a debt collection agency involved or hiring a repo company to seize the car. It’s best not to push your luck, though.

If you are worried about defaulting on your car loan and having your vehicle repossessed, you should talk to your lender and explore your options. By being proactive, you may be able to avoid defaulting on the loan and repossession. Avoiding the repo process will save you time, effort, and stress.

How Does Repossession Impact Your Credit Score?

Lenders report repossessions to the credit bureaus. This shows up as a negative mark on your credit report and will hurt your credit score. A repo can decrease your score by 100 points or more and will stay on your credit report for up to seven years. Your score may also suffer from other negative marks leading up to the repo like missed payments. You could also end up having to pay fees, interest, and deficiency judgments. This will all make it much more difficult for you to get credit cards, personal loans, and other lines of credit in the near future.

If there is inaccurate information about a repossession on your credit report or if the same past-due account appears twice, then you should dispute the error and remove the repossession from your credit report. Depending on your circumstances, you may want to dispute the repo with your lender or the three major credit bureaus (Experian, Equifax, and TransUnion). You can also work to repair your credit — either on your own or by hiring a credit repair company.

What Are Your Rights as a Borrower?

If a lender hires a repossession company to seize your vehicle, remember you have certain rights. Those rights include but are not limited to:

  • The repo agent can’t break into your home without permission.

  • The repo agent can’t breach the peace. This means they can’t use physical violence, make verbal threats, or break into locked buildings such as a locked garage.

  • When the lender sells the vehicle to recoup their losses, they must sell the repossessed car for a commercially reasonable price given the make, model, condition of the car, and the current market. 

  • You are entitled to get any personal belongings that were in the car back prior to the sale.

What Is a Repossession Order?

A repossession order form is a legal document that gives the lender the right to repossess an asset such as a car, boat, jewelry, electronics, appliance, or other personal property that the lender has a security interest in. Usually, the creditor in a secured loan doesn’t need to get a repossession order form from a court. That’s because the loan contract includes terms that allow the lender to repossess the secured asset without a court order if the borrower defaults.

In many states, lenders don’t have to give borrowers notice before repossessing a vehicle. But some states that are more friendly to borrowers do require lenders to give advanced notice prior to a repossession.

What Is Replevin?

While repossession typically doesn’t involve a formal court process to seize the car, a creditor can obtain a replevin order. This court order requires the borrower to return the vehicle to the lender. If the borrower fails to comply with the replevin order issued by a court, they may face civil and criminal penalties.

A creditor is much more likely to seek help through replevin when the car is hidden, missing, or the repo agent can’t repossess the car without breaching the peace. Since getting a replevin order is a formal court process, the lender must serve the borrower with proper notice of the motion and court hearing, along with an affidavit of service, notifying the borrower that they must surrender their vehicle.

How To Prevent Repossession

Though there are some ways to get your car back after repossession, avoiding repossession will keep negative information off your credit history and protect your credit score. If you’re already past due on your auto loan payment, it can be challenging to avoid repossession. After a lender has repossessed the car, they may keep it or sell it to pay off the loan. This is why it’s important to speak with your lender if you hit a financial rough patch and anticipate missing a payment. 

If you’re able to catch up on the past-due payments, you can avoid car repossession and reinstate the loan. If you’re not able to do that, you can give the car back to the creditor through a process called voluntary repossession, or you can file for bankruptcy. If you file before your car is repossessed, you’ll benefit from the court issuing an automatic stay. This stops all collection efforts, including repossession. But filing for bankruptcy after a repossession may be a good option for some people as well. Upsolve has a free web tool to help you file Chapter 7 bankruptcy for free. Or you can speak to a bankruptcy attorney to learn more about your options.

Let’s Summarize...

If you’ve fallen behind on your auto loan payments you may be setting yourself up for repossession. Most creditors don’t need a court order to seize a vehicle on a past-due account because the loan contract includes terms that allow them to do it. If you’re struggling to make payments, be proactive and contact your lender as soon as possible to discuss your options. Avoiding repossession will protect your credit score and save you a lot of stress.

This way, you can go out for a drive without having to worry about your credit score, dealing with your lender, or dealing with a repo man. Enjoy the ride.



Written By:

Attorney Eric Hansen

Eric D. Hansen is an experienced Minnesota attorney within a number of varying and nuanced practice areas. He has operated his own solo practice as well as worked at small suburban boutique firms and large diversified downtown law firms. Eric has a wealth of experience in busines... read more about Attorney Eric Hansen

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