Texas Repossession Laws

The ways creditors can seize personal property for nonpayment of debt differ by state. Some require more notice to borrowers or more days creditors must wait before repossessing the car. In Texas, lenders are entitled to “self-help” repossession. This means they can hire unlicensed repo companies to tow away your car. But “self-help” is not a blank check. 

Texas repo law restricts how creditors can take your car. If they break the law, you can sue them for wrongful repossession. Borrowers also have rights to prevent repossession and get their cars back. This article details the repossession process in Texas and outlines the rights of both parties if it happens.

Texas Repossession Process

Section 9.609 of the Texas Business and Commerce Code governs auto repossession in Texas. It allows repossession by a lender who has a security interest in the car. This is almost always the case because you use the car as collateral to secure the loan necessary to buy it. This makes a car loan a secured debt. You promise to make monthly payments to pay down the debt or you lose the car. Under Texas law, if you miss even one car payment — or pay after the grace period has expired — the lender can take the vehicle. Repo men in Texas don’t need a permit to tow your car. In fact, most repossession agents are unlicensed. 

A lienholder can take your car with no prior notice to you. But there are certain limits on vehicle repossession. Repo men may not need a court order to seize personal property, but they do need to make it happen without breaching the peace. A breach of the peace occurs when conduct is likely to cause a public disturbance or loss of public order. 

What Repo Agents Can’t Do

While a breach of the peace is not clearly defined, Texas repo agents cannot: 

• Break into a locked property, such as a gated yard 

• Threaten violence or damage property in the process

• Trick you into taking your car to a shop and repossessing it after you leave

• Proceed with a repossession when you verbally protest 

If the repo man threatens actual violence, it’s best not to escalate. But you can call the police to report what’s going on. In these cases, breach of the peace is not speculative, but likely. So you may have a claim for wrongful repossession.

What Repo Agents Can Do 

Texas law also declares some car repossessions in certain private spaces fair game. For example, a Houston repo company can enter private property and:

• Take your car from a non-enclosed space

• Tow your car from the grocery store parking lot

• Repossess your car while you are at work

• Seize a car parked outside your home while you are inside

All it takes is a bit of stealth and waiting for the right moment when you are distracted. Although repo men don’t have to give you written notice before towing your car, they must inform you once they have taken it. The notice must include where your car is located and ways to get your car back.

What Borrowers Can And Can’t Do

Although you are allowed to protest auto repossession, you can’t conceal the car, threaten violence, or stall the repossession or foreclosure process. You struck this bargain when you used your car as security. If you actively prevent the lienholder from retrieving the vehicle, you may end up getting in trouble with the police.

But, all the stuff you had in the car is yours and you can get it back. The repossession company is allowed to collect loose items from inside the car and store them. You can make an appointment to retrieve your personal property. If the repo company refuses, contact the lender. If you’re not given your belongings back, you can recover the fair market value of the items by filing a complaint in small claims court.

Getting Your Car Back After Repossession

Once your car is towed, you have a few options to get it back:

• Redeem the car by paying the loan balance 

• Reinstate the loan by paying all past due bills and costs

• Negotiate with lender to refinance the loan

• File for Chapter 7 or Chapter 13 bankruptcy

Reinstatement of the original loan terms is only possible when you can pay the outstanding balance, late fees, and repossession costs. These are the fees the lender had to pay for hiring repo agents and for towing and storing your car. 

Redeeming the car requires paying the loan balance in one lump sum within 10 days. This is hard for most people already behind on payments. If you don’t pay the balance, the lender can sell the car at a public auction to reclaim the money that’s owed.

Owing Money After A Texas Repossession

If the lender sells your car at a public auction, you must be notified of the time and place and can bid on your car. All of the proceeds go to cover the lender’s repossession costs first. These include towing, storage, preparation for sale, and auction fees. The remaining proceeds go toward the debt. This means the full amount owed on the car, which includes the principal balance, unpaid interest, and any late fees. 

If the sale does not cover these costs, the lender can sue you for the difference. You’re responsible for the balance that didn’t get paid by the sales proceeds. If the lender sues you for the deficiency balance, you’ll receive notice of the lawsuit through a summons. You must answer the summons. If you ignore it, a default judgment will eventually be entered against you. In other words, the judge will enter a decision as if the lender won, making you responsible for all the claimed fees, even if the lender exaggerated.

But it’s possible to fight the lawsuit. Lenders must be accurate in everything they claim. That is, what they say you owe, including the loan balance, late fees, and repossession costs. The Fair Credit Reporting Act requires it. Lenders can’t inflate fees or duplicate them. If there is a clerical error or mistake, let the court know. 

Before the lawsuit, you have another chance to come to a settlement with the lender. Going to court is costly for lenders, so they may be willing to talk about taking less money in monthly payments instead of paying much more for attorneys. Even if you defend the lawsuit in court and don’t win, you can still try to negotiate a lower settlement amount with the lender, though it becomes much harder once a judgment is entered.

Using Bankruptcy To Avoid Repossession In Texas

If you’re in danger of having your car repossessed, bankruptcy is one option that might allow you to keep your car. Once you file bankruptcy, an automatic stay goes into effect. This stops all collection actions, including repossession. You can keep your car if you reaffirm the car loan. Reaffirmation requires that you make monthly payments to keep the car. But if you fall short, lenders can still sue you for the deficiency balance and you will lose the car.

After filing for bankruptcy, while enjoying the automatic stay, you'll still need to figure out if you can afford to keep your car. As discussed earlier, you can always redeem it by paying a lump sum. The benefit of redemption in bankruptcy is that you don’t have to pay the full amount the lender says you owe; instead, you pay only the fair market value of the vehicle. But if you won’t be able to afford the vehicle, you can also choose to surrender it in bankruptcy. Surrendering the car frees you from any future debts on the vehicle.

Bankruptcy can also help you eliminate debts associated with your repossession. These include the deficiency balance and any judgments the lender obtained against you. 

Chapter 7 bankruptcy is more common because it doesn’t require a three to five-year repayment plan like Chapter 13 and offers a quicker discharge of your debt. If your case is complex, you may want to consult a local bankruptcy lawyer. But Upsolve is a free web app that gives users with simple cases the ability to prepare their own bankruptcy forms and file Chapter 7 without an attorney. See if you qualify by answering a few simple questions.

Let’s Summarize...

Repossession law allows lenders to repossess vehicles if they were used to secure car loans. If the borrower misses one payment in Texas, the lender can send out the repo man. Repo agents in Texas need not be licensed, give the borrower notice, or get a court order before taking the vehicle. But they must repossess without breaching the peace. Taking the car from a public street or parking lot without the borrower’s knowledge is allowed. 

Borrowers have 10 days to come up with the balance or the car will be auctioned. Lenders can sue for the amount left owing. Bankruptcy could stop repossession at least temporarily and free the borrower of a car loan they can’t afford.  Upsolve free tool is available for Chapter 7 filers with simple cases who file their bankruptcy without a lawyer. For those who don’t qualify to use the free app, Upsolve can also help filers find a lawyer.