Can You Repo Cars If Someone Owes You Money?

According to New Hampshire Legal Aid, there are circumstances where a car can be repossessed and sold to pay off a debt. If you loaned someone the money to buy a car, took a valid legal security interest and they are in default of the loan, you can repossess their car.

Promissory Note

In order to have the right to repossess the car, there must first be a legally enforceable loan. The promissory note must be in writing, signed by the debtor, and must set out in detail how much money the debtor must pay the lender and when he must do so.

Security Agreement

There must also be a clause in the note or a separate document that gives the lender a security interest in the car. This means that the debtor must keep current in payments or the lender will have the right to repossess the car. Failure to make payments on time is called default. The note will specify how many payments must be missed or how late they must be before there is default and the car can be repossessed.

No Breach of the Peace

If a debtor defaults on a legally binding note and security agreement, the lender may repossess a car in any manner that does not cause a breach of the peace. This happens when any violent force is used to repossess the car. If the debtor confronts the "repo man" and tells him to leave the car alone, he must do so or he breaches the peace. This is why cars are frequently repossessed at night. If the car is in a garage and the repossession man breaks in the garage, this is a breach of the peace. The repossession company is also supposed to allow the debtor to take his personal belongings out of the car before it is repossessed. The repossessor may not be assisted by the police, but they should inform them after the repossession.

Commercially Reasonable Sale

The repossessed car must be sold for a reasonable price and in a reasonable manner. Repossessed cars are usually sold at an auction by dealers. If the auction is well advertised and attended and the car sells for around retail value, the sale is commercially reasonable. The lender must notify the debtor when and where the car will be sold. If the car sells for less than the debt plus the costs of sale, the debtor owes the bank a deficiency. On the other hand, if the sale price is larger than the debt plus costs, the lender owes the debtor the surplus.