what is repossession?
When you buy a vehicle on credit, the contract will give the lender the right to take back the vehicle if you fall behind on your loan payments. In Minnesota, most repossessions are done by “self-help,” meaning without any court oversight.
How to know if a repossession is wrongful
In a self-help repossession, the lender has to follow certain steps, otherwise the repossession may be illegal:
You must be behind on payments. Seemingly, this would go without saying, but we occasionally see cases involving people who weren't late on their payments when their vehicle was repossessed. I've also heard of situations where the vehicle was repossessed even after the loan was paid in full.
If your lender has accepted repeated late payments, they must send you a letter first. In Minnesota, this is called a Cobb letter. The letter must give you notice that although your lender has accepted late payments from you in the past without repossessing, it now requires you to strictly comply with the payment due dates or it may repossess. This notice requirement may be unique to Minnesota.
The repo agent can't breach the peace during the repossession. Although there isn’t a bright line definition of a breach of the peace, it typically occurs when the repo man has to resort to force or threats of force to take your vehicle.
The repo man can't break into a locked garage. Minnesota law forbids the repossession agent from breaking into your garage to seize your vehicle. However, this rule is a little fuzzier if you share a garage with other people, like in an apartment building.
The police can’t actively help the repossession. Sometimes, the repo company enlists the local police department to stand by during the repossession. As long as the police merely stand by to keep the peace, it’s probably not illegal. However, if the officers actively engage in the repossession, the repo may be against the law.
Most of the courts that have looked at this issue have found that the police may act to diffuse a volatile situation, but may not aid the repossession agents in such a way that the repossession would not have occurred but for their assistance. If the police threaten you with arrest or command you to turn over the vehicle, they've probably crossed the line from keeping the peace into active involvement.
If your vehicle was wrongfully repossessed, you can sue for damages.
If the repo company wrongfully repossess your vehicle, you can sue them (and the lender) for damages. Depending on the circumstances, the defendants may have to pay your attorney fees and court costs.
What to watch for after your vehicle was legally repossessed
Even if the repossession was strictly by the book, there are a number of things you need to know about the post-repossession process. In most cases, once your lender repossesses the vehicle they will sell it at an auction and apply the sale proceeds to your loan balance. Keep an eye on a few things during this process:
The lender must send you a letter before and after the sale. The pre-sale letter must tell you when, where, and how the vehicle will be sold. It must also tell you how much money you have to pay to get the vehicle back. The post-sale letter must tell you how much the vehicle was sold for and explain whether you still owe money on the loan.
You may get sued if there is still a balance on your loan. This is called a deficiency lawsuit. It happens in cases where the auction sale proceeds were not enough to pay off the full balance of the loan. In this case, the lender may sue you to recover the remaining balance. Fortunately, there are a number of ways to defend a repossession deficiency lawsuit.
What to do if your vehicle hasn't been repossessed yet
If the lender is threatening to repossess, but hasn't seized your car yet, there are some options to avoid the repossession:
Can you re-finance the loan so that you can better afford the payments? Credit unions may offer better rates than more conventional auto lenders.
Can you sell the vehicle to a private party and get enough cash back to repay the loan? This is probably a long shot, but may be worth exploring just to cover all your bases.
Is filing bankruptcy an option? Both Chapter 7 and Chapter 13 bankruptcy may provide you with a number of attractive solutions to avoid repossession.
If you’ve explored all of these options with no luck, and repossession seems like a sure thing, here are some tips. First, keep all letters and documents related to the repossession, including the envelopes. Second, remove any non-essential personal property from your car (don’t forget the glovebox and trunk). Make a detailed list of stuff that you must keep in the car, like jumper cables, child seats, flashlights, tools, etc. Or better yet, take pictures or video. Finally, keep in mind that you don’t have to consent to the repo man entering your house or garage. But never use violence against the repo man. Keeping your car isn’t worth risking a dangerous confrontation.
Be very careful about hiding your vehicle to prevent a lawful repossession
Under Minnesota law, it may be a crime to refuse to disclose the location of, or otherwise conceal, a vehicle that your lender is legally entitled to repossess. The penalties include a hefty fine or even imprisonment. It’s fine to park your car in your garage, but be really careful about hiding or concealing it somewhere else to evade a lawful repossession.
Ready to talk to a lawyer about a repossession in Minnesota?
Schedule a free consult with attorney Todd Murray.
Since 2009, Todd has been helping Minnesotans combat wrongful repossessions and defend repo deficiency lawsuits. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.