Secured creditors have the legal right to repossess property that is collateral for a loan under certain circumstances. That legal right is known as repossession. If the creditor does not have the right to repossess the property or does not complete the repossession according to the requirements of the loan agreement and state law then the repossession is deemed a wrongful repossession.
When is a Repossession Wrongful?
A wrongful repossession occurs if any of the following factors are proven by the debtor:
The creditor had no right to repossess the property:
You simply need a copy of your loan agreement, documentation of your payment history and proof that the creditor repossessed the property. Your loan agreement will provide the answer as to whether the creditor had a security interest in the property and the circumstances under which the property could be repossessed. Your payment history will indicate whether you were in default on the loan. Together, this information will determine whether the creditor had the legal right to repossess your property. If the creditor did not have the right to repossess the property but did so anyway then a wrongful repossession likely occurred.
The creditor has accelerated the loan without a contractual right to do so:
Often times, creditors will require debtors to pay the accelerated amount of the loan (i.e., the full outstanding balance of the loan, not just the late payments currently due) upon repossessing the vehicle. However, in order to have the legal right to do this, a creditor must have the right to accelerate the balance; this right is not provided to secured creditors under the Uniform Commercial Code. Many times, however, creditors will nevertheless claim an entitlement to the accelerated balance of the loan as a condition for the return of the vehicle upon repossession, even where no such contractual right exists. Such conduct may establish the predicate for a claim of civil theft or conversion under state law, entitling the debtor to recovery of treble damages or punitive damages is the vehicle is not returned.
The creditor failed to follow proper procedures to repossess property:
Even if the creditor had the right to repossess the property, the creditor is required to follow all of the laws in your state about how to repossess property. For example, many states require creditors to provide you with notice that indicates that you have the right to cure the default by paying past due amounts or paying the loan in full by a date certain, especially if the creditor has been accepting late payments for a number of months prior to repossessing the vehicle. Prior to that date and absent providing the required notice, the creditor cannot repossess the property. Similarly, state laws require that creditors do not breach the peace when they repossess property. If, for example, your car is parked in your locked garage, then a creditor cannot break into your garage to take possession of the car. If the creditor fails to provide the legal notice, breaches the peace, or violates any other law related to repossession then a wrongful repossession has occurred.
What Can You do if You’ve Been the Victim of a Wrongful Repossession
If you have been the victim of a wrongful repossession then you may have the right to sue for damages. Your potential damages depend on the specific circumstances of your case. A wrongful repossession may prevent a creditor from recovering a deficiency judgment against you for the difference between the money that was owed to the creditor and the value of the collateral that was repossessed. Additionally, you may be able to receive statutory damages (including treble damages in some instances) for the act of wrongful repossession, property damages if your property was harmed during the repossession, punitive damages if the creditor refused to return the property, and additional damages if the repossession hurt your credit rating or impacted your ability to keep your job. For these reasons, it is important to understand when a wrongful repossession has occurred and take the necessary steps to protect your rights.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you believe you have been the subject of a wrongful repossession, contact Maney | Gordon for a free consultation at 1-866-344-LAWS (5297).