Repossession Laws in Texas

Your auto lender has the right to take your car back if you break your loan contract, such as by not making your car payment. That is your lender’s right of repossession. State repossession laws are mostly similar across the U.S., but each state has important differences. This article discusses your rights and your lender’s rights and responsibilities under Texas repossession laws.

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

Under your loan contract, your lender has a security interest in your vehicle until the loan is paid. This makes your lender a lienholder on the vehicle. If you break your agreement, your lender can consider you to be in default. Making your payment on time is a key promise in your loan agreement. You can be in default as soon as you’ve missed the due date for a single monthly payment. Once you’re in default, your lienholder has the right to repossess your car.

Your loan contract might include a grace period. A grace period gives you additional time to make your car payment after the due date without consequences. But there are different kinds of grace periods. A grace period before owing late fees is different from a grace period before defaulting. Read your loan contract carefully.

Car loan contracts almost always require you to have collision or comprehensive auto insurance on the vehicle. Most contracts also say that if you don’t keep that insurance current, you’re in default of your loan agreement.

Will I Be Notified Before the Repossession? How?

Your lender might give you a verbal or written notice that it will repo your vehicle if you don’t get caught up on your loan, but it doesn’t have to.

How Can I Prevent a Repossession?

Just because you miss your payment due date doesn’t mean your lender will repossess your car immediately, even if they legally can. But if you’re late on your payment, don’t waste any time getting caught up. As long as you get your payment in before your lender takes steps to hold you responsible, you’ll avoid repossession. It’s usually a good idea to call your lender right away to explain why you’re late and when you’ll be able to make your payment. Depending on your contract’s terms, you still could have to pay a late fee.

Once your lender sends out a repossessor or accelerates your car loan, it will be too late to catch up on your payment. When your lender accelerates your loan, the entire loan becomes due. Your lender can accelerate your loan after you’ve defaulted. It’s likely that your car loan contract included a term that waived your right to get any notice before your lender accelerates the loan. If your lender already has accelerated your loan, then your lender can reject your attempt to pay late. 

If it looks like you’re not going to be able to pay on time, it’s usually better to talk to your lender before your payment is due. Explain your situation and ask what your options are. For example, your lender might be able to give you more time to make the payment or agree to let you defer the payment. Your lender will be more likely to help if it’s your first time being late or it’s been a long time since you were late.

What you can’t do to prevent repossession is hide your car. Doing so is a crime in the state of Texas.

What Can Repo Companies in Texas Do?

Lenders can engage in self-help repossession, meaning they don’t need a court order to take your car. A Texas business doesn’t need a special license to operate as a repossession company. But repossession agents using tow trucks do need tow truck operating licenses from the Texas Department of Licensing and Registration. 

A repossession company can get your car from anywhere it isn’t protected in some way, whether it’s on public or private property. For example, your car can be repossessed when it’s parked on any street, in any parking lot, or in anyone’s driveway. It’s even okay for a repo agent (often called a repo man) to go into a home garage when the door is open! 

They Can’t Breach the Peace

Self-help car repossession isn’t allowed when it results in a breach of the peace. Texas law doesn’t define breach of the peace, but here are a few examples that would generally be considered a breach of the peace:

• Opening a closed garage door to repo your vehicle

• Breaking into a locked gate to repo your vehicle

• Threatening to use or using physical force on anybody

• Threatening to damage or damaging real or personal property

It might be a breach of the peace for a repo agent to take your vehicle if someone objects during the repossession process. Also, if a police officer intervenes to aid in a vehicle repossession, this may count as a breach of the peace.

Your loan contract can’t authorize conduct that would qualify as a breach of the peace.

You Can Peacefully Object to a Repo

A vehicle repossession would likely be in breach of the peace if the repossession agent continues with the repo attempt after someone objects. But any objection has to be peaceful. If the repo agent doesn’t listen, your safest bet is to contact a lawyer after the repossession. 

You can’t threaten repo agents, get into a physical confrontation with them, or damage their property. Doing so may expose you to criminal charges or other legal trouble. Remember that doing anything to hide your car from repossession is a crime. It’s possible that doing anything to prevent your car from being repossessed could be criminal. 

No Repo of Vehicles From Tribal Lands Unless Tribal Law Allows

There are only three federally recognized Native American tribes with reservations in Texas. Auto repossession taking place within a reservation must comply with the law of that tribe. 

Limits on Repo of Vehicles Purchased by Members of the Military

A member of the military who purchased a vehicle before entering military service has some additional protection against auto repossession. The federal Servicemembers Civil Relief Act requires a lienholder to get a court order to repossess such a vehicle during the term of the buyer’s military service.

What About the Personal Property in My Car?

Your loan contract may authorize the lender or repo agent to take your personal belongings with the car and dispose of them. But if your contract allows this, it also must require the lender to give you the following notice: 

• The lender must give you written notice (by mailing or hand-delivering) that it has your personal property within 15 days of discovering the items. 

• The notice must tell you reasonable times when you can get the items and where you can go to get them. 

• It has to inform you that you have 30 days after the date the notice was mailed or otherwise delivered to you to claim your belongings.

• The notice needs to explain that your lender can dispose of the property if you miss the deadline to claim it. 

It’s better not to wait to get the notice, though. If you’re there at the time of the repo, try to take everything out of your car before it’s taken. Otherwise, contact the repossession company as soon as possible about getting your things. If you don’t know where the car has been taken, call your lender to find out.

You can’t be required to pay to get your property back from a repossessed car. Any attempt to do so could be unlawful. The federal Consumer Financial Protection Bureau considers it an unfair trade practice.

Although neither your lender nor a repossession agency can refuse to let you get your personal belongings back, it might take longer to recover them than you’d like. Also, there’s always the risk that something’s missing. Proving what was in the car when it was repossessed isn’t easy to do. So if you think your car may be repossessed, it’s safer to take everything out of the car whenever you’re not in it. That includes your car purchase documents, though it’s best not to keep those in your car anyway.

What Happens After a Repossession in Texas?

As a secured creditor, your lender will resell your car to reduce the amount you owe. A lender can sell a repossessed car in a private sale or at a public auction.

You Must Be Given Notice Before Your Vehicle Is Sold

Your lender has to give you written notice before it sells your car. Lenders must send the notice to borrowers within a reasonable amount of time ahead of the intended sale. Ten days is the minimum amount of time that a court would consider reasonable.

The notice has to tell you:

• What you need to do if you want to get your vehicle back

• Whether your lender will sell your vehicle at a private sale or public auction

• If the sale will be by public auction, the notice must list the date and time of the auction, plus where it will be held

• If your lender plans to make a private sale, the notice must list the earliest date the lender would make a sale

• That you’re entitled to an accounting of the debt

• What, if any, liability you may have for a deficiency

For either type of sale, the date on the notice lets you know your deadline for redeeming your vehicle. Knowing the specific information for a public auction is important if you want to participate in the auction by bidding to buy your vehicle back. You might even be able to get it for less than market value. Friends or family members also could go to the auction to bid on the vehicle.

The Sale Must Be Commercially Reasonable

Whether the sale is public or private, it must be conducted in a commercially reasonable manner. In general, a sale is commercially reasonable if it’s a normal business transaction, even if the vehicle could’ve sold for a higher price in a different situation. For example, it’s usually fine to sell a car at a public auction for less than the lender might have made from a private sale. But don’t expect your lender to get fair market value for your vehicle.

But it’s probably not commercially reasonable if your lender makes a cheap, private sale of your vehicle to one of the lender’s employees, for example. 

Another example of a situation where the sale might not be commercially reasonable is when your lender doesn’t get around to selling your car for a long time. In this case, the vehicle’s value may drop significantly. Also, when you’ve already paid 60% or more of the cash price of your vehicle purchase, it won’t be commercially reasonable if the sale happens more than 90 days after the repossession.

What Happens With the Money From the Sale?

The amount your car sells for doesn’t all go to reduce your debt. First, the sale proceeds go to cover the repossession costs. Those can include the cost of the actual repossession, charges for storing the repossessed car, expenses to prepare the car for resale, and any costs involved in the sale. Sale proceeds can also be used for your lender’s reasonable attorney fees and costs, if there were any and if your loan agreement allows. Only after these costs have been paid will the sale proceeds reduce your debt. 

Usually, there’s not enough money from the sale to cover the full amount of your loan balance. If any money is left over, your lender has to give it to you. But it’s more likely that there’ll still be some balance left on your loan. This is called the deficiency balance. 

When To Get Legal Advice

If you think any part of the repossession process wasn’t done right, try to get legal advice as soon as possible. The following are some examples of problems a lawyer might be able to help with:

• The repossession happened before you were in default on your car loan.

• A breach of peace happened during the repo.

• Your lender’s written notice before the sale was missing information or gave incorrect information.

• The resale price of your car seems very low and something about the sale process is questionable. 

• Your lender or the repo agent used any false or deceptive tactics to repo your car.

Do I Still Owe After a Repossession in Texas?

Unfortunately, you probably will. Repossession is just your lender’s first remedy when you’ve defaulted on your car loan. But it doesn’t wipe out your debt unless the sale of your repossessed car covers all the repo and sale costs and the rest of your loan. In almost all cases, you’ll still owe a deficiency balance. Deficiencies are common for several reasons. For example:

• The repo and sale costs add to your debt.

• Sales after repossession often bring in less than the fair market value of vehicles. 

• Since vehicles tend to depreciate quickly, it’s easy to be upside-down on your loan. That’s when the balance of your loan is higher than your car’s value. If that happens, it’s almost a guarantee that the sale price of your repossessed car will leave you with a balance. 

It’s not uncommon for someone who knows they can’t keep up with their car loan to decide to surrender their car voluntarily. This is known as voluntary repossession. That still doesn’t get you off the hook for the loan, but it can reduce your deficiency balance. Voluntarily returning your car to your lender means you won’t be charged for a repo agent coming to get it. That could save you hundreds of dollars.

Your lender has to send you a written explanation of the deficiency if it demands that you pay the deficiency. In addition to stating the total amount of the deficiency, the explanation needs to show:

• The amount of your debt before your lender resold your vehicle

• The amount the vehicle was sold for

• All credits you should get (for example, a refund of unearned interest or from the cancelation of insurance or service contracts you’ve paid for)

• All costs related to the repossession and sale of your vehicle

Rather than waiting, you can ask for a written explanation of deficiency. If you do, your lender has to give it to you within 14 days. 

There isn’t a deadline for paying the deficiency. But if you don’t pay it, your lender could sue you to try to force you to pay it. Also, it’s not unusual for your lender to sell your debt to a debt buyer that will then come after you.

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

In some circumstances, filing bankruptcy might allow you to get your car back. Otherwise, you have to exercise your limited right of redemption if you want to get it back. Redeeming your car requires that you pay more than just your past-due amount. You have to pay the full amount of your loan balance and all the costs related to the repossession. You can redeem your car as long as your lender hasn’t yet sold it. Your lender must include information about how to redeem your car in the notice it’s required to send after the repossession. 

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

• TexasLawHelp.org has some good information on repossession and a good directory for other legal service options.

• Texas RioGrande Legal Aid, Lone Star Legal Aid, and Legal Aid of NorthWest Texas all offer free legal advice or representation for eligible Texans.

• The Legal Hotline for Texans provides free legal advice on repossession for Texans aged 60 or older.

• You can search for a private consumer law attorney in Texas through the National Association of Consumer Advocates. 

• You can also contact the State Bar of Texas’s Lawyer Referral & Information Service to get a referral to a private attorney. The attorney will give you a short consultation for a very small fee.

• The Texas Office of Consumer Credit Commissioner accepts some types of complaints about wrongful repossession.