Repossession Laws in Montana

Montana is a big state with a lot of wide-open spaces. Since there isn't much in the way of public transportation in many towns, most people need a car to get around. That's why it's especially bad for a Montanan to find their car missing due to repossession. A lender is allowed to repossess a vehicle when a borrower defaults on their auto loan agreement. The most common reason for default is missing a payment.

This article covers many of the questions you may have about vehicle repossessions in Montana such as how to avoid them, how car repo companies are regulated, and how to get your personal items or your car back after an auto repossession.

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

Montana repossession laws allow a car loan company to repossess your car as soon as your payment is late. Some companies do repossess after a payment is late by only a few days. Usually, you'll be allowed more time, but some predatory lenders will repossess more quickly.

Will I Be Notified Before the Repossession? How?

As a general rule, a Montana creditor doesn't have to give you notice before they repossess your car. There's a very important exception to this general rule. If the car is on a reservation of a Native American tribe, the creditor must get a court order. The order usually needs to be issued by a tribal court. At least some of these courts require the lender to give the vehicle owner notice prior to the repossession. There are several different tribes in Montana, and they each have their own tribal laws. 

How Can I Prevent a Repossession?

There is little legal protection from vehicle repossessions in the state of Montana unless you live on a Native American reservation. 

The best way to avoid repossession is to make sure you're dealing with a reputable lender when you buy the car and to contact your lender as soon as you know you can’t make a full payment. If you have a reputable lender and you're having a difficult time making payments, you may be able to work out a plan with the lender that allows you to catch up on payments. 

If you’re dealing with a predatory lender, it may be quick to repossess. If you have a double-digit interest rate — especially if the rate is higher than 20% — your lender may be predatory. If so, try to find a reputable lender to refinance your car loan.

Special Rules if You Live on a Native American Reservation

Approximately 7% of the population of Montana lives on a Native American reservation. Many of these people are not Native Americans. People living on these reservations are more likely to be facing financial difficulty than Montanans living elsewhere in the state. If you live on a reservation, you're lucky to have better consumer protection laws against vehicle repossessions.

If you live on a Native American reservation, a repo company can't repossess your motor vehicle while it’s on the reservation without a court order. But they can repossess the car if it's found off the reservation. Some repo companies will follow you when you leave the reservation. When you leave your car in an off-reservation parking lot, they'll repossess. The repo company can also come on to the reservation to repossess your vehicle if you give them permission to do so. 

What Can Repo Companies in Montana Do?

Repossession companies can take a car from your unfenced yard or your driveway. But they can’t go into your garage, take your car from behind a locked fence, or breach the peach. If you see the repossession happening and you tell the repo agent to stop but they don’t, they are breaching the peace. That said, you need to make your point without resorting to force. The repossession agencies can't breach the peace, but you can't either. If the repossession agents take your vehicle over your objection, you may have a claim to get it back. 

If you keep your car in a garage or behind a locked fence, the repo company can get a court order for you to turn over the car. If after they have a court order, you still don’t turn over the car, law enforcement may assist the repo company.

What About the Personal Property in My Car?

If you think your car may be repossessed soon, you should get any personal possessions out of it. While the repo company is required to give your possessions back, it can be hard to prove what was in the car, and the company may charge you a fee for storing your things. If you had things in a car that was repossessed in Montana, you'll want to call the repo company to make arrangements to get your things.

What Happens After a Repossession in Montana? 

After your car is repossessed, the lender will sell it to recoup its costs unless you can redeem the car. You can redeem the repossessed vehicle at any time before it's sold by paying off the debt plus the cost of the car repossession. But this is rarely practical since if you had the money to pay off the debt, the car probably wouldn’t have been repossessed.

Though repossessed cars are often sold at an auction, there's no auction requirement in Montana. Montana's version of the Uniform Commercial Code requires all aspects of the repossession sale to occur in a commercially reasonable manner. This means the lender must give reasonable notice of the sale to the borrower. Though the Montana code doesn’t spell out what’s reasonable for consumer transactions, it’s probably more than 10 days. The notice must include the time, date, and place of the sale.

If the lender fails to comply with any part of Montana's laws governing repossessions and sales, you may be entitled to damages. Borrowers may sue and recover the actual damage the lender's noncompliance costs them plus an additional $500. A borrower could also recover by using the noncompliance as a defense in a deficiency lawsuit.

Do I Still Owe After a Repossession in Montana? 

At the repossession sale, your car must be sold for a commercially reasonable price. You can bid on the car yourself, but so can the lender. If you have a deficiency balance, your car being sold at auction is not the end of your problems with the lender. A deficiency balance is when your car sells for less than the amount you owed on the car plus the costs of collection and repossession. 

For example, if you owed $10,000 on the car loan and it cost the lender $1,000 to repossess your car, you’ll owe $11,000 minus whatever the car sells for at auction. If it sells for $8,000, you’ll owe a $3,000 deficiency balance. That’s $11,000 minus $8,000. The lender can sue you for this amount. If they get a judgment, they'll be able to collect the $3,000 plus any new expenses such as court costs and attorneys fees. They can collect this money by garnishing your wages or taking the money from your bank account.

The car loan is secured by the collateral (your car). You’re upside-down when the value of the collateral is less than your loan balance. If you’re upside-down on your vehicle, there’s a much higher chance of a deficiency balance. When you’re upside-down and behind on your car loan, it’s a good idea to consider voluntarily returning the car to the dealer. This is because you can reduce this deficiency balance by doing a voluntary repossession where you voluntarily surrender the vehicle to the lender instead of having it repossessed. In that case, using the example above, the $1,000 in repossession costs wouldn’t be part of your deficiency balance. 

In the same example above, if the sale proceeds were $12,000 instead of $10,000, the lender would owe you money since there would be a $1,000 surplus. The lender is legally required to pay you any surplus. 

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

Under state law, you can redeem (get back) your car after it’s been repossessed. To get your car back, you have to pay the full amount you owed on the loan plus the lender’s repossession costs. You can redeem your repossessed vehicle at any time before it’s sold. If you didn’t have the money to make your car payments, you’re unlikely to have the money to redeem your car. But you may be able to get a separate loan and use the loan proceeds to redeem your vehicle.

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

The following links provide free resources to help you with any auto repossession issues:

• Montana Law Help has information on protecting your car from repossession.

• Montana Legal Services provides an informative brochure on repossession and your rights.